This morning the research student presenting the morning meeting at the Bank of England will have arrived with a hop, skip and a jump. Not only will the Governor have been in good news after yesterday’s events there is this to tell him.
“October saw the biggest monthly rise in UK house prices since January this year, with the value of the average UK home increasing by +0.6% (£1,647). That brings the typical property price up to £299,862 – the highest on record – while annual growth also increased to +1.9% (from +1.3%).” ( The Halifax)
At this point the monthly rise and the annual increase acceleration normally signals of joy are dwarfed by the ability to tell Governor Andrew Bailey that he has driven UK house prices to their highest levels ever. The room will be packed as no-one will want to miss the chance to be spotted by the Governor as they all independently decide to join in with singing this.
For he’s a jolly good fellow, for he’s a jolly good fellow For he’s a jolly good fellow, and so say all of us!
Once the chorus of cheers has faded the research student will have the opportunity to also point out this.
“Demand from buyers has held up well coming into autumn, despite a degree of uncertainty in the market, with the number of new mortgages being approved recently hitting its highest level so far this year.”
Indeed for reasons I am about to explain even things which ordinarily would be accidentally omitted will be included.
“There is no doubt that affordability remains a challenge for many. Average fixed mortgage rates are currently around 4% and likely to ease down further, but with property prices at record levels, moving home can feel like a stretch.”
At this point there will be a danger of a crush as so many rush forwards to tell the Governor that he has handled a difficult economic situation with aplomb and great skill. Remember as the Bernanke Review assured us there is no group think at the Bank of England.
The Policy Decision
Seldom can a Governor of the Bank of England be so pleased with such a tight vote.
Five members (Andrew Bailey, Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill) voted in favour of the proposition. Four members (Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor) voted against this proposition, preferring to reduce Bank Rate by 0.25 percentage points, to 3.75%.
Ordinarily a Bank of England Governor would be upset at such a challenge to his authority, but in this instance his power was increased. That is for two reasons and we can start with realpolitik where he can now cut interest-rates in December and please Chancellor Rachel Reeves. Also he would be sticking to his apparent plan of cutting interest-rates at every other meeting as well. As I have been pointing out for a while his power has been enhanced by the fact that Swati Dhinga and Professor Alan Taylor can be relied on to vote for an interest-rate cut at every occasion.
Swati Dhingra
Let me give you an example of how little reality affects Swati Dhingra. Below is the first chart from yesterday’s press conference and it shows that UK inflation has risen since the middle of 2024.
Monetary Policy Report – November 2025 – Press Conference
Which she interprets as disinflation.
Disinflation remains clearly on track, with balanced risks to inflation and downside risks to activity. Food price inflation, while concerning, may have limited scope to generate second-round effects (Box B) and acting pre-emptively to counteract a mechanism little influenced by UK monetary policy risks potential policy errors.
Meanwhile even the press conference statement tells us this.
The increase in inflation over the past year..
As you can see she is perhaps the extreme case of preferring theory over reality. Readers may like to note her apparent dismissal of the rise in food prices which will be at the front of the minds of most people. That was even contradicted by the Governor in the press conference when he admitted that food and energy prices had driven things. Sadly the press corps were either asleep or too embarrassed by their own past reporting to point out that he had just torpedoed years and indeed decades of claims about core inflation.
If we look back a year she has learnt absolutely nothing because here is the Bank of England from November 2024.
CPI inflation is expected to increase to around 2¾% by the second half of 2025 as weakness in energy prices falls out of the annual comparison, revealing more clearly the continuing persistence of domestic inflationary pressures.
As you can see they cut interest-rates based on expectations of inflation that were 1% too low. But you see for Swati it was even worse than that and let me show you via the Minutes from December 2024. The emphasis is mine.
Three members preferred a 0.25 percentage point reduction in Bank Rate at this meeting. The most recent data developments pointed to sluggish demand and a weakening labour market, now and in the year ahead, both of which would see further downward pressure on demand, wages, and prices.
The further downwards pressure on prices was in fact inflation rising with food prices in the van. Indeed with inflation rising as it has this was wrong too.
a continued stance that was very restrictive
So for her it is a case of Earth Wind and Fire.
Every man has a placeIn his heart, there’s a spaceAnd the world can’t erase his fantasiesTake a ride in the skyOn our ship, fantasizeAll your dreams will come true right away
Returning to today’s theme both she and Professor Alan Taylor mean that the Governor can cut interest-rates at will.
Deputy Governor Sarah Breeden.
I pointed out yesterday the fact that on policy meeting day she decamped to a stablecoin conference and below are the thoughts of former policymaker Andrew Sentance on this.
It seems Sarah Breeden, #BoE Deputy Gov, took time off from yesterday’s #MPC meeting to speak in the City. This appears to be a breach of MPC Purdah rules, so hopefully
can explain or Bailey can be asked at the BoE press conference later.
Perhaps she was in such a rush that she inadvertently failed to realise she was not voting with the Governor?
Combined with my view that policy remains restrictive and slack continues to build, this gives me enough confidence to cut now.
Still no fear as no doubt her new stablecoin friends will keep her in employment should the Governor punish her.
QT
Another of my themes was in play as the Governor mentioned QT in the press conference. During his word salad I was unable to avoid the thought that yesterday brought responses from both the Bank of England and ECB to the change in policy from the US Federal Reserve. Please remember that acceptance and a policy change is preceded in the human response function by anger and denial and yesterday was denial.
Comment
Governor Andrew Bailey will have left yesterday’s press conference with a skip in his step. Added to his usual enthusiasm for a trencherman’s style luncheon was the realisation that things are going to his plan. He can now sit back and wait for the Budget to unfold and is an a powerful position as he has an interest-rate cut in his pocket. Indeed the Chancellor seems to be already trying to curry favour with him.
The chancellor has decided against increasing taxes on banks in this month’s budget, according to reports, which sent UK bank shares higher on Thursday.
Shares in the high street banks NatWest and Lloyds rose by about 2%, putting them among the top risers on London’s FTSE 100. ( The Guardian)
Such news about “The Precious! The Precious!” may even have persuaded him to send a flunkey down to the Bank of England wine cellar for a bottle of its finest claret.
There is an irony here because if you look at inflation he is the most unsuccessful Governor for decades and yet as I have just explained he finds himself with an interest-rate cut and if he should choose an end to QT in his pocket. So do not be surprised if the Budget is Bank of England friendly. In UK power politics it does not matter if you are proven to be incompetent if you are dealing with someone even more incompetent.
