Monetary Policy

Bank of England was right to hike and should do more


SUGGESTED ARTICLES

Brexit

IEA releases briefing on what a minimal Brexit deal might mean

Lifestyle Economics

IEA releases report on why we need to allow the e-cigarette market to grow

Tax and Fiscal Policy

Julian Jessop comments on BoE interest rate rise

Commenting on the Bank of England raising interest rates by 0.25%, Julian Jessop, Chief Economist at the Institute of Economic Affairs, said:

“The Bank of England made the correct decision today and should be ready to raise interest rates further next year, provided the economy continues to weather the impact of Brexit better than most had expected.

“The Bank only cut its key rate from 0.5% to 0.25% last August because of fears of a recession following the EU referendum. It is therefore nonsense to blame Brexit for the reversal of a rate cut that was itself due to Brexit.

“The economy has been weaker than it would otherwise have been, but GDP has continued to grow at an average pace of 0.4% quarter on quarter in the five quarters since the vote to Leave. What’s more, unemployment has continued to fall.

“As a result, there is no longer any need for interest rates to be kept at emergency lows. Gradually returning interest rates towards more normal levels may actually help to end the squeeze on real wages, by providing further support for the pound.

“Any increase in interest rates will put more strain on some borrowers. However, today’s quarter point hike in the Bank rate is unlikely to have any significant impact on the cost of credit for most households. There are also many better ways to protect the most vulnerable than keeping interest rates at unsustainably low levels.”

Notes to Editors:

For media enquiries please contact Stephanie Lis, Director of Communications: [email protected] or 0207 799 8909 or 07766 221 268.

Further IEA Reading: Financial Stability without Central Banks

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 and seeks to provide analysis in order to improve the public understanding of economics.

The IEA is a registered educational charity and independent of all political parties.


Leave a Reply

Your email address will not be published.


SIGN UP FOR IEA EMAILS