No Excuse Not to Cut Interest Rates
18 July 2024
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Economics
In the Media
Daniel Freeman writes for The Times
18 July 2024
Economic Theory
11 November 2024
Andrew Lilico quoted in The Telegraph
IEA Economics Fellow Andrew Lilico has been quoted in The Daily Telegraph responding to news that inflation remained steady at around 2% in June.
Andrew said:
“Despite this being a slight surprise (relative to expectations of a fall), the Bank of England should not use this as an excuse not to cut interest rates.
“As matters stand, long-term interest rates (as defined by UK 10 year government bond yields) sit at just over 4pc whilst the Bank’s short-term policy rate is 5.25pc.
“Thus policy is quite tight relative to the expected long-term norm. What is that tightness seeking to achieve?
“Inflation is at target now. Monetary growth has been very low (indeed was negative for a long period). There is no problem for tightness to cure.
“The Bank seems overly-concerned by wage data. But wage rises are typically caused by inflation rather than being a cause of it.
“Although recent GDP growth has been fairly robust, and there is relatively little evidence of overly-high interest rates creating immediate other economic problems (e.g. mortgage-holder financial distress), the Bank should be cutting rates now rather than waiting.
“Monetary policy works with a lag. If the Bank waits until problems are visible, it will have waited too long.”
Read the full article here.
Andrew said:
“Despite this being a slight surprise (relative to expectations of a fall), the Bank of England should not use this as an excuse not to cut interest rates.
“As matters stand, long-term interest rates (as defined by UK 10 year government bond yields) sit at just over 4pc whilst the Bank’s short-term policy rate is 5.25pc.
“Thus policy is quite tight relative to the expected long-term norm. What is that tightness seeking to achieve?
“Inflation is at target now. Monetary growth has been very low (indeed was negative for a long period). There is no problem for tightness to cure.
“The Bank seems overly-concerned by wage data. But wage rises are typically caused by inflation rather than being a cause of it.
“Although recent GDP growth has been fairly robust, and there is relatively little evidence of overly-high interest rates creating immediate other economic problems (e.g. mortgage-holder financial distress), the Bank should be cutting rates now rather than waiting.
“Monetary policy works with a lag. If the Bank waits until problems are visible, it will have waited too long.”
Read the full article here.
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