Rate cuts will be back on the agenda soon
Matthew Lesh writes for City AM
“Bank of England Governor Andrew Bailey is wrong to say that it is ‘much too early to be thinking about rate cuts’. Economic activity and inflation have both been weaker than the Bank had expected, money and credit growth have collapsed, and business surveys are already signalling recession.
“Despite this, the Monetary Policy Committee has kept its bias toward raising rates further, based on its judgement that the risks to inflation are skewed to the upside. Indeed, the Bank is still tightening monetary policy by selling back the UK government bonds it bought under ‘quantitative easing’ – and at a faster rate than before.
“If these upside risks fail to materialise, it won’t be too long before rate cuts are back on the agenda. But in the meantime, the Bank would do better to keep all its options open.”
Notes to Editors
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At its October meeting, the IEA’s Shadow Monetary Policy Committee urged the Bank to cut interest rates to 5 per cent to avoid the risk of deflation and recession. Read more here: Cut interest rates to avoid recession, says IEA’s Shadow Monetary Policy Committee.
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