Why the Bank of England isn’t lowering rates yet
Spectator (UK)Jun 21
The Facts
The Bank of England's (BoE) Monetary Policy Committee (MPC) voted by a margin of 5-4 on Thursday to reduce its Bank Rate of interest by 0.25 percentage points to 5% — citing "progress in moderating risks of persistence in inflation."
Consumer Price Index (CPI) inflation in the UK sat at 2% — the BoE's target figure — in both May and June. The MPC projects inflation in the UK to rise to 2.75% in the second half of 2024 before falling to 1.7% and 1.5% in two and three years, respectively.
The Spin
Pro-establishment narrative
With many expecting the BoE to remain firm at 5.25%, today's decision is a small win for the property and mortgage markets. With lenders already beginning to bring down prices, the news is reaffirmation to many that things are slowly but surely getting better.
Establishment-critical narrative
A small reduction in the BoE's interest rate will do next to nothing for millions who have been affected by the cost of living crisis. While the UK may be over the worst of the post-pandemic era, and an interest rate cut will certainly be of some help to small groups, the economy irrespectively remains extremely fragile.
