This week, I’m talking with Adam Lawrence, a property investor with a vast portfolio and an economics background. While the conversation touches on Lawrence’s property ventures, the focus is primarily on the economics, particularly the Bank of England and interest rates.
We discuss the concept of forward guidance and its effectiveness, as well as the accuracy of economic forecasts. Adam provides insights into the factors influencing inflation, such as external events like the Ukraine crisis and their impact on commodity prices. We also delve into the role of interest rates in controlling inflation and the challenges faced by the Bank of England in making decisions.
KEY TAKEAWAYS
- The Bank of England’s forward guidance has been criticised for its lack of accuracy in predicting economic outcomes, such as recession and interest rate changes.
- The Bank of England uses market forecasts to inform its own predictions and decision-making, but this approach can lead to uncertainty and confusion in the markets.
- External factors, such as global commodity prices and geopolitical events, can have a significant impact on inflation and the economy, making it challenging for the Bank of England to control inflation solely through interest rate adjustments.
- The Bank of England’s communication and clarity of strategy have been questioned, with concerns about the effectiveness of forward guidance and the lack of coordination between the bank and the government.
BEST MOMENTS
“I think people kind of missed the point with that Jerry because that’s good central banking in my book because ultimately there’s a Ben Bernanke phrase where he said good central banking is 98% talk and 2% action and that’s what you want.”
“I think they’ve used models that are great while everything is chugging along relatively stably, right? And the problem is things have not been chugging along with stability at all. This has been a relatively unprecedented cycle.”
“People suffer with sunk cost ideologies and stuff all the time.”
“When the facts change, I change my mind, sir. What do you do? People definitely get stuck in ruts and don’t want to admit that they’re fallible. There’s definitely a part of that. They are human, as you said.”
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