Bank of England should step up the pace of rate cuts
16 October 2024
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Economics
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17 October 2024
Commenting on data showing that the rate of inflation fell below the 2% target for the first time in three-and-a-half years to 1.7% in September, Julian Jessop, Economics Fellow at the free market think tank, the Institute of Economic Affairs, said:
“Today’s better than expected inflation data add to the growing evidence that UK interest rates are far higher than they need to be. The cooling in the labour market should also ease fears about services inflation.
“Admittedly, the September numbers were flattered by swings in transport costs. The rise in domestic energy bills also still means that inflation will jump above the 2% target again in October.
“Nonetheless, inflation is set to be lower than the Bank of England had been forecasting. The gradual pass through of previous interest rate rises and the rapid slowdown in the growth of the money supply mean that the risks will remain on the downside.
“The Bank should therefore reduce rates by at least a quarter point at the November MPC meeting. Indeed, a large package of tax rises in the October Budget could tip the balance towards a half point cut.”
ENDS
Notes to Editors
Contact: media@iea.org.uk / 07763 365520
At its July meeting, the IEA’s Shadow Monetary Policy Committee, of which Julian is a member, urged the Bank of England to cut interest rates immediately, warning that excessively tight monetary policy could become a drag on economic growth.
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.
“Today’s better than expected inflation data add to the growing evidence that UK interest rates are far higher than they need to be. The cooling in the labour market should also ease fears about services inflation.
“Admittedly, the September numbers were flattered by swings in transport costs. The rise in domestic energy bills also still means that inflation will jump above the 2% target again in October.
“Nonetheless, inflation is set to be lower than the Bank of England had been forecasting. The gradual pass through of previous interest rate rises and the rapid slowdown in the growth of the money supply mean that the risks will remain on the downside.
“The Bank should therefore reduce rates by at least a quarter point at the November MPC meeting. Indeed, a large package of tax rises in the October Budget could tip the balance towards a half point cut.”
ENDS
Notes to Editors
Contact: media@iea.org.uk / 07763 365520
At its July meeting, the IEA’s Shadow Monetary Policy Committee, of which Julian is a member, urged the Bank of England to cut interest rates immediately, warning that excessively tight monetary policy could become a drag on economic growth.
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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