Bank of England should cut rates now. Real rates remain too high and policy acts with long lags
Bank Of England should cut rates now they are too high.
Real rates are too high and keeping policy tight on top of QT will stifle growth.
Monetary policy acts with 12-18 month lag and real rates need to fall to support economic recovery .
The announcement of today’s 2.3% CPI figure is yet more evidence of the need for interest rates to come down sooner rather than later.
Current inflation numbers should not be the yardstick used by a central bank to judge the stance of monetary policy as the impact of interest rates takes time to work through the economy. The Bank of England should be anticipating the next 12 -18 months rather than worrying about inflation today and even core inflation is well below the 5.25% bank rate.
Britain needs an economic revival to deal with the after effects of recent global disruptions, the pandemic and Brexit. Keeping interest rates too high for too long is the biggest danger to an economy laden with debt at both public and private sector levels.
Monetary policy this tight also compounds the negative impacts of Quantitative Tightening (QT) which is another drag on growth as money is withdrawn from circulation.
The sooner rates fall the better.
One thought on “Bank of England should cut rates now. Real rates remain too high and policy acts with long lags”
The bank of England were increasing interest rates to curb spending which was wholly wrong. People haven’t been overspending for years as they have less disposible income than ever. The inflation wasn’t caused by people over spending, it was caused by brexit, putins war, and partly the pandemic. These events are out of B of E control and totally out of goverment control. Inflation would have followed the same path, virtually, even had interest rates never been tinkered with. If the B of E was so sure that inflation was due to over spending in the country, they should have simply increased taxes to the richest people because obviously it will have only been them over spending, as no one else had any money to over spend !! Putting interest rates up has damaged our economy unneccessarily. We all now suffer the consequences. Trouble is the government and the B of E is full of individuals that do not and never have, lived in the REAL WORLD !