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Julian Jessop, Economics Fellow at the free market think tank the Institute of Economic Affairs, responded to the Bank of England’s decision to cut interest rates to 4.25%

“The Monetary Policy Committee’s majority decision to cut rates by another quarter point was widely expected and fully justified by the downside risks to inflation and growth. The only real surprise was the split, with two members voting for a half point cut and two for no change.

“The three-way split on the MPC sends mixed signals about the future path of interest rates and may disappoint those looking for more clarity. In part this reflects the variable quality of the official statistics, notably on the state of the labour market.

“Nonetheless, the diversity of views is a fair reflection of the heightened economic uncertainty, both at home and abroad.

“If anything, the lack of groupthink is something to cheer. It would be more worrying if nine rate-setters all came to exactly the same conclusion despite the many unknowns, including the fallout from a global trade war.

“It is also good to see a whole section of the Monetary Policy Report devoted to developments in broad money. This included an acknowledgement that these developments might be signalling downside risks to activity and inflation, albeit with ‘significant uncertainties’.

“Many commentators, including members of the Shadow MPC which meets at the IEA, have been arguing for some time that the Bank has not been paying enough attention to monetary aggregates, so this is another welcome sign that the reral MPC is now taking account of a wider range of perspectives.”

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