IEA - Rate cuts will be back on the agenda soon
Julian Jessop, Economics Fellow at the free market think tank, the Institute of Economic Affairs, commented on the Bank of England Monetary Policy Committee’s decision to hold Bank Rate at 5.25 per cent
“Bank of England Governor Andrew Bailey is wrong to say that it is ‘much too early to be thinking about rate cuts’. Economic activity and inflation have both been weaker than the Bank had expected, money and credit growth have collapsed, and business surveys are already signalling recession.
“Despite this, the Monetary Policy Committee has kept its bias toward raising rates further, based on its judgement that the risks to inflation are skewed to the upside. Indeed, the Bank is still tightening monetary policy by selling back the UK government bonds it bought under ‘quantitative easing’ – and at a faster rate than before.
“If these upside risks fail to materialise, it won’t be too long before rate cuts are back on the agenda. But in the meantime, the Bank would do better to keep all its options open.”
Notes to Editors
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At its October meeting, the IEA’s Shadow Monetary Policy Committee urged the Bank to cut interest rates to 5 per cent to avoid the risk of deflation and recession. Read more here: Cut interest rates to avoid recession, says IEA’s Shadow Monetary Policy Committee.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
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