Bank of England Governor Mark Carney and colleagues face a "dilemma" when they gather Thursday on Threadneedle Street in the heart of central London to discuss interest rates - at least according to virtually every mainstream media account of today's policy meeting.
A spike in consumer prices to a near five-year high, coupled with an employment rate that hasn't been this robust since the mid-1970s, has, the pundits declare, accelerated bets that Carney & Co. will lift the Bank's benchmark lending rate from a record low of 0.25% in order to better manage price stability.
The pound's recent spike certainly supports that thesis: it came within a whisker of a one-year high against the dollar earlier this week and has risen some 3.3% against a weakened greenback, to 1.3202, since late August.
But there is no dilemma, there won't be a rate increase and Britain's central bank isn't going to influence the key drivers of U.K. inflation by lifting rates any more than you or I are going to improve our retirement prospects by skipping lunch one every two weeks and slip the $10 we've saved into a piggy-bank.
Britain's economy is wheezing its way into a potential recession as growth stalls amid investor indecision on the country's post European Union future and consumers zip up their pockets amid searing housing costs, rising shop prices and limp monthly paychecks. In fact, the U.K.'s first half advance has been the slowest in five years and the latest reading on industrial production indicates growth of around 0.2%.
"Treading water" is how the British Chambers of Commerce, a lobby group, describes Europe's third-largest economy which, despite the 12% collapse in the pound since the country voted to leave the EU last year, still has a trade in goods deficit of $15.4 billion and is shifting less and less "stuff" to markets around the world.
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"We should be under no illusions. Brexit is having an effect on the economy, no question," Sir Charlie Mayfield, chairman of the employee-owned retailer John Lewis, told BBC Radio Thursday. "It's the same for everybody, and the main effects are sterling and confidence."
And while Britain's unemployment rate hit a 42-year low of 4.3% in the three months ending in July, too many commentators ignore the fact that 15% of the workforce -- according to recent figures from the Office for National Statistics -- is self-employed.
Add to that the fact that those who receive a paycheck that doesn't carry their own signature are seeing pay increases that fall well below the rate of inflation (2.1% versus 2.9%, data published this week showed) and it becomes very difficult to argue that tight labor conditions are going to push prices higher.
What *will* push prices higher, however, is the cost of imported goods, particularly energy and food, and the casual gouging of everyday consumers that rarely seems to trouble Britain's myriad levels of business regulation (one example: Apple's swanky new iPhone X will cost 4% more in Britain than it will in the United States, once value-added taxes are stripped away, and 24% more when they're left inside the price).
With Britain's fractured parliament unable to agree on even the most basic aspects of a withdraw from the European Union -- six months after it triggered the Article 50 mechanism to much pomp and circumstance -- and both sides of the House of Commons hell-bent on holding to promises to limit immigration, the chances of securing a trade-friendly deal with Brussels, which insists on free movement in return, look stark.
How that translates into a firmer pound on foreign exchange markets -- with or without a BoE rate increase -- is anyone's guess.
Carney himself has, repeatedly, cautioned U.K. lawmakers that the Bank's ability to influence economic prospects is limited until the government can properly articulate a post-Brexit strategy that satisfies business leaders in the U.K. and political leaders in the EU.
Until that happens -- and believe me when I tell you that won't be today -- he's not going to raise interest rates.
And there is no dilemma.
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