Could Haldane have helped save us from inflation?

Would Andy Haldane, the economist who left the Bank of England to run the Royal Society of Arts, have made a better governor than Andrew Bailey? You might be thinking that Daffy Duck would have made a better fist than Bailey of combatting the cost of living crisis. But seriously, Haldane was an outsider (backed by this column) in the race won by Mark Carney in 2012, and Dominic Cummings reportedly wanted him to follow Carney in 2020. He’s a brilliant real-world observer and it’s poignant to know that, though he warned Monetary Policy Committee colleagues early last year to brace for inflation, it has ‘surpassed my worst expectations’. He thinks the Bank has been damagingly slow in its responses and that we’re heading for ‘a massive shock’ precipitated by the need for sharply higher interest rates.

But ‘I’m really the wrong person to ask about why they got it wrong’, he told the Sunday Telegraph, and there’s a sense in which Haldane is a natural backbencher – never put to the test, as Bailey has been, of frontline leadership. And of course the Ukraine war has shifted the whole spectrum of economic expectations relative to where they were just a few months ago. Still, his remarks provoke big questions.

Were the Bank’s repeated understatements of the accelerating pace of inflation deliberate signals to discourage firms from raising prices and workers from demanding higher wages, even if the signals failed to work? Or a disastrous misreading of the available data? As a judgment on Bailey and his team, which is worse? And who now puts credence on their latest forecast: that the UK economy will ‘narrowly avoid’ a two-quarter recession and inflation will peak precisely at 10.25 per cent?

You can almost hear Bailey’s media crew: ‘Ten’s too round, governor, and we think any whole number above ten’s too frightening.