The forecast Andrew Bailey actually got right

When inflation was at 5.5 per cent and rising in January 2022, the BBC’s Faisal Islam adopted a look of amazement when he asked the governor of the Bank of England, Andrew Bailey: ‘So you’re trying to get inside people’s heads and ask them not to ask for too high pay rises?’ ‘Broadly, yes,’ Bailey stepped into the trap, ‘It’s painful, but we need to see that in order to get through this problem more quickly.’

The governor was slated for insensitivity, critics making much of his own half-million package. That 38-second clip did more to make his out-of-touch reputation than any of his other stumbles. But he wasn’t wrong.

The risk was always that as external inflation factors led by energy costs receded, rising wages would overtake as the driving force, obliging the Bank to raise interest rates higher and longer – and thereby inflicting at least as much pain as greater wage restraint might have done.

And that’s precisely where we are now, with private sector wage growth at 8.2 per cent, ahead of inflation at 6.8 per cent in July, and public sector settlements racing to catch up. ‘Unsustainable’, says Bailey in sadness, having also told Faisal Islam: ‘I don’t want, in any sense, to sugar the message.’ He certainly didn’t – and it can be no consolation that, just for once, his forecast was spot on.

Perpetually messy

Financial disasters, like wildfires, lead news bulletins only until something more eye-catching displaces them. Once a bank has been bailed out, the media lose interest. Credit Suisse, we might assume, is now tucked peacefully inside UBS, which absorbed its failing rival in March. But the reality of such episodes is rarely so tidy or finite. On the positive side, UBS says it no longer needs ‘backstop’ loss guarantees from the Swiss government.