Think Tanks
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IEA - Bank of England should step up the pace of rate cuts
Julian Jessop, Economics Fellow at the free market think tank, the Institute of Economic Affairs comments 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
“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.”
