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Title: UK Inflation Expert Warns BOE Should Halt Hikes Before Recession

Jun 15, 2022 12:27AM ET

By: AnalysisWatch

The Bank of England should prepare to stop raising interest rates ahead of a likely recession early next year, according to Tim Congdon, a veteran British monetarist who was an early predictor of the global inflation shock.

Citing a collapse in money supply growth—a metric whose rise in 2020 first prompted him to warn of a coming tide of rising prices—he reckons officials should only raise the policy rate "a little" beyond the current 1% level and that a cyclical slump is already both likely and necessary.

Congdon made his comments in a wide-ranging interview with Bloomberg earlier this month, in which he railed in his usual undiplomatic style against central bankers, including Bank of England Governor Andrew Bailey, saying calls for wage restraint among workers are "evil" and denouncing the economic profession, which he has long shunned.

A former adviser to Margaret Thatcher's Conservative government in reshaping macroeconomic policy in the 1980s, Congdon was one of the first to predict after the pandemic broke that the U.K. and the U.S. would face price growth of historic proportions.

It was in June 2020 that he predicted double-digit inflation as economies on both sides of the Atlantic headed for recession and prices plummeted.

Other such soothsayers, including former economic policymaker Charles Goodhart, later former Treasury Secretary Lawrence Summers, and Olivier Blanchard, a former chief economist at the International Monetary Fund, have burnished their reputations.

But Congdon remains on the sidelines because the monetarism he practiced—the theory that inflation can be controlled by managing the money supply—has been largely ignored by the economic community for at least two decades.

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