Don’t ignore the B-plot

As Makerfield votes, inflation unexpectedly holds steady

(Credit: Jack Gavigan / Creative commons)

This is no time for contrarian takes. The story of the day is unfolding in the market towns and former coal mining communities on the outskirts of Wigan, where voters are poised to elect the Labour candidate and in doing so precipitate a leadership challenge against the Labour prime minister.

But sometimes, even when the main story garners all the marketing buzz, it is the B-plot that steals the show. Perhaps the best example comes from the classic Friends episode, “The One with the Embryos”, in which Phoebe agrees to undergo IVF to become a surrogate for her half-brother, Frank Jr. and his wife, Alice.¹

It’s a major life event for one of the characters, carries real emotional heft and has long-term consequences for the rest of the season. Of course, what many fans remember most fondly is the secondary storyline — the ultimate trivia contest between Monica, Rachel, Chandler and Joey where [spoiler alert] the boys win the girls’ apartment.

For the purposes of today’s newsletter, the role of B-plot will be played by the latest inflation figures from the Office for National Statistics.

Managed Expectations

UK inflation unexpectedly held at a 13-month low of 2.8% in May, comfortably below the 3% forecast by analysts. While higher petrol prices and airfares increased pressure on prices, these were partially offset by lower food inflation. This would represent welcome news even if it didn’t arrive hours before today’s Bank of England decision on interest rates.

Yes, the Monetary Policy Committee was already widely expected to keep the main rate unchanged at 3.75%, with all 65 economists polled by Reuters predicting a freeze. And sure, this all chimes with Governor Andrew Bailey’s ‘wait-and-see’ approach to the inflationary impact of the Iran War. Still, it is good news at a good time.

Not least because, up to this point, pressure for a rate rise was, well, rising. The Strait of Hormuz had remained effectively closed. The Australian, European and most recently Japanese central banks were tightening monetary conditions. The US Fed, though yet to move, is expected to enact at least one rate hike this year. Surely Britain, the home of stubborn inflationary pressures, would be next in line?