Is the economy going t*ts up?
3 Mar, 2023
This week the Governor of the Bank of England gave a masterclass in the art of being ‘specifically vague’. Talking about the outlook for interest rates – currently at 4% and tipped by many analysts to rise to 4.5% in the summer – he confused pretty much everyone. The Times headline was “Interest rates may need to go higher, Andrew Bailey suggests,” whilst over the river in the City, the FT led with “Andrew Bailey signals no pressing need for more UK interest rate rises.” Huh?!?!
Let me paraphrase
I am now going to imagine that I run the Press Office of the Bank of England - “Oh Congrats, Holly!” 🎉 “Thanks!” 😃 and my job is to communicate what he thinks. Here goes.
[The Guv’nor] “We think the economy is potentially doing a good enough job of going softly t!ts up by itself that I don’t need to wade in with my size 10s and make it worse.
But I’m a bit worried that if I give a press briefing saying that the economy is going t!ts up, then the economy really will go t!ts up.
So I’ll just give a press briefing saying mebbe it will and mebbe it won’t. And then everyone will just feel all confused.
And if the economy does go t!ts up all by itself, then I don’t need to put on my Darth Vadar cloak and put interest rates up even more.
And if it doesn’t go t!ts up, then I’ll have to brandish my interest rate lightsaber again. But I’ll tell everyone you’ve got to be cruel to be kind using long words they don’t understand, and shove up rates from 4% to 4.25%.
But it’s fine anyway because everyone will blame Rishi Sunak/Liz Truss/Prince Harry/The French (*delete as appropriate) and not me.”
In other news
The end of the tax year is looming folks. We have 33 days, 13 hours and 13 minutes left as I write. To sort our stuff out and try to use ISA allowances, pension allowances and think about any capital gains tax and income tax housekeeping. There are lots of things to consider. Here are three small examples:
Saving for a house? If you have a Lifetime ISA, if you can persuade someone to help and pay in £4,000 in March and then £4,000 after 5th April, you would get an extra £1,000 in March and another £1,000 in April. 2 grand from the Government in the space of a month isn’t bad.
No spare cash but got shares outside an ISA? Transfer them into an ISA, as part of your £20,000 annual allowance, and move them into a tax-free environment for the future. This is ludicrously known as Bed and ISA. Ask your platform.
Higher-rate taxpayer? Pushing the £100,000 earnings threshold? (over which your marginal rate becomes 60% cos you start to lose your Personal Allowance). If you pay into a pension and effectively reduce your income, you can get your tax bill down considerably.
We have two events coming up which will help with your questions.
First – our Money Clinic next Tuesday at 6pm with 2 money coaches from Bestinvest. Aimed at less confident savers and investors this will tackle all your questions on investments and pensions. Get started. Build a portfolio. Get your head around pensions, etc.
Second – on Tuesday 14th we’re running a Shake Up Your Savings webinar with Barclays, talking tax year end tips and strategies to make more of your money – cash, ISAs, pensions and tax.
Breaking news
Oh dear. Incoming. I regret to inform you that I have been sacked from my imaginary job as Press Officer for the Bank of England. Apparently I didn’t quite get the tone right…
P.S. Breaking news this morning from The Times suggests that the Government’s energy price guarantee will remain at current levels for another three months from April, keeping the average annual bill at £2,500 – if correct this is welcome news for everyone panicking about the rises to come from April. From July, the market rates should be lower, meaning the Government can step away from subsidies as prices fall.
Have a great weekend everyone!
Holly
