Bank of England has been too slow to cut rates – but it is getting there
9 May 2024
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In the Media
IEA's Shadow Monetary Policy Committee quoted in The Express
9 May 2024
In the Media
Economic Theory
25 June 2024
Responding to the Bank of England Monetary Policy Committee’s decision to hold Bank Rate at 5.25%, Julian Jessop, Economics Fellow at the free market think tank, the Institute of Economic Affairs, said:
“The Monetary Policy Committee left rates on hold this week, as expected, but there are some clear signals that cuts are coming soon.
“For a start, Dave Ramsden joined Swati Dhingra in voting for an immediate cut. This means that only three of the other seven members need to switch camp.
“Moreover, the Bank lowered its medium-term inflation forecasts, with the two-year projection now slightly below the 2% target. Crucially, this forecast is based on market expectations for the path of interest rates, which assume some quite large cuts.
“Finally, the statement included some new language which emphasised the importance of the ‘forthcoming data releases’. With two sets of price and labour market releases between now and the next meeting in late June, rates could be cut next month, or in August at the latest.
“The Bank is still moving too slowly for comfort. But the MPC does at least seem to be paying more attention to developments in broad money and credit, which may now play a bigger part in decision making. Better late than never.”
ENDS
Notes to Editors
Contact: media@iea.org.uk / 07763 365520
The latest meeting of the IEA’s Shadow Monetary Policy Committee urged the Bank of England to cut interest rates by at least 0.5%. The group group of independent economists who shadow the Bank have raised concerns that a slowdown in the money supply could cause deflation and recession unless the MPC changes course.
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.
“The Monetary Policy Committee left rates on hold this week, as expected, but there are some clear signals that cuts are coming soon.
“For a start, Dave Ramsden joined Swati Dhingra in voting for an immediate cut. This means that only three of the other seven members need to switch camp.
“Moreover, the Bank lowered its medium-term inflation forecasts, with the two-year projection now slightly below the 2% target. Crucially, this forecast is based on market expectations for the path of interest rates, which assume some quite large cuts.
“Finally, the statement included some new language which emphasised the importance of the ‘forthcoming data releases’. With two sets of price and labour market releases between now and the next meeting in late June, rates could be cut next month, or in August at the latest.
“The Bank is still moving too slowly for comfort. But the MPC does at least seem to be paying more attention to developments in broad money and credit, which may now play a bigger part in decision making. Better late than never.”
ENDS
Notes to Editors
Contact: media@iea.org.uk / 07763 365520
The latest meeting of the IEA’s Shadow Monetary Policy Committee urged the Bank of England to cut interest rates by at least 0.5%. The group group of independent economists who shadow the Bank have raised concerns that a slowdown in the money supply could cause deflation and recession unless the MPC changes course.
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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