00:00Well, let's get some more on this topic now with Stephen Millard, who is the Deputy Director of Macroeconomic Modelling
00:06and Forecasting at the National Institute of Economic and Social Research.
00:11Thank you so much for being with us, Stephen.
00:13So, we had a clear sense of it in those two last reports, but how widely would you characterise it,
00:19the effects of the disruption at the Strait of Hormuz?
00:22And how long do you think it could take for things to get back to normal, if that is even
00:26possible?
00:28Well, as your previous two reporters said, the effects are very widespread indeed.
00:34And where it's most noticeable, of course, in the price of petrol, the price of gas and electricity, and, of
00:43course, food and fertilisers, as was mentioned by your correspondent.
00:49These effects are likely to be locked in for a while.
00:52And even with the Strait of Hormuz beginning to get back to normal, it is going to take a good
01:00few months until everything is sort of coming back down again.
01:05So, yeah, we're in for higher prices for a while.
01:08And what about central banks?
01:10How are they positioning themselves?
01:12And could policymakers be forced to delay further interest rate cuts or even raise them again, you know, despite really
01:19serious concerns about slowing economic growth?
01:23Yeah, so before the war started, we were expecting all central banks pretty much to cut their rates over the
01:29course of 2026.
01:31Since then, actually, we've seen a rise in rates from the ECB.
01:35We now expect both the Fed and the Bank of England to hold rates throughout this year on account of
01:42the higher prices.
01:43But having said that, with things beginning to return to normal and a peace process in place, then maybe we
01:52might see central banks start cutting rates early next year.
01:55And how can economies build greater resilience for the future against these kind of geopolitical shocks like this one?
02:03I mean, no one had really particularly heard of the Strait of Hormuz or not generally before this, but it's
02:08been such a pinch point.
02:10How can resilience be built so this does not happen again?
02:14Well, I mean, in terms of energy specifically, and that, I guess, is the biggest issue with the Strait of
02:20Hormuz, then the answer is to speed up and intensify the green transition.
02:25The less we're reliant upon fossil fuels, the less we will be reliant on the Strait of Hormuz being opened.
02:31More generally, of course, your correspondent again mentioned a whole ton of supply chains where the supply of various things,
02:40fertilizers, helium, hydrogen, come through the Strait of Hormuz.
02:44The answer is to look for alternative sources of supply and to think about reshoring supply chains, sort of making
02:54supply chains a little bit more local and a little bit less open to geopolitical events such as this one.
03:01All right, Stephen Millar, Deputy Director of Macroeconomic Modelling and Forecasting at the National Institute of Economic and Social Research.
03:07Thank you very much for sharing your insights with us today.
