Bank of England Keeping Interest Rates Too High For Too Long
9 May 2024
SUGGESTED
Monetary Policy
In the Media
Economic Theory
25 June 2024
Andrew Lilico writes for The Spectator
Andrew Lilico, the Chair of the IEA’s Shadow Monetary Policy Committee (SMPC), has written for The Spectator discussing the SMPC’s latest recommendation for the Bank of England to cut interest rates.
Andrew wrote:
“It is understandable that the Bank is now overcompensating by being extra cautious about lowering rates too soon in case inflation persists or rises again. It is natural not to want to make the same mistake twice. It is also understandable that, given that the Bank’s models failed to predict inflation going so high, there might be a concern that future projections for inflation are likewise under-predicting its levels.
“There is, however, no deep mystery as to why inflation rose or why it is now falling.
“Instead of attempting to over-correct for past errors, the Bank should heed the monetary signals and respond by immediately cutting rates. The Institute of Economic Affairs’ Shadow Monetary Policy Committee, which I have the honour of chairing, has recommended an immediate cut of 0.5 per cent. The inclusion of experts on monetary economics in the MPC would bring much-needed intellectual diversity to a committee that has been lacking in it recent years. But in the meantime, the Bank should see sense on interest rates – and cut them.”
Read Andrew’s full piece here.
Read more about the SMPC’s latest recommendation to cut interest rates by at least 0.5%.
Andrew wrote:
“It is understandable that the Bank is now overcompensating by being extra cautious about lowering rates too soon in case inflation persists or rises again. It is natural not to want to make the same mistake twice. It is also understandable that, given that the Bank’s models failed to predict inflation going so high, there might be a concern that future projections for inflation are likewise under-predicting its levels.
“There is, however, no deep mystery as to why inflation rose or why it is now falling.
“Instead of attempting to over-correct for past errors, the Bank should heed the monetary signals and respond by immediately cutting rates. The Institute of Economic Affairs’ Shadow Monetary Policy Committee, which I have the honour of chairing, has recommended an immediate cut of 0.5 per cent. The inclusion of experts on monetary economics in the MPC would bring much-needed intellectual diversity to a committee that has been lacking in it recent years. But in the meantime, the Bank should see sense on interest rates – and cut them.”
Read Andrew’s full piece here.
Read more about the SMPC’s latest recommendation to cut interest rates by at least 0.5%.
SHARE
