As the Bank of England’s Monetary Policy Committee (MPC) announces its interest rate decision today it has the chance to reverse the damage caused by its interest rate hikes. Rates have been fixed at 5.25 per cent since last August and the Bank has stubbornly refused to cut them. We’re all paying the price.
Those final rate rises were clearly an error
The truth is that inflation is lower and has fallen much faster than the Bank used as its justification for raising rates. In August, the Bank’s model indicated that, even with interest rates raised to 5.25 per cent, inflation would be 5 per cent last year. It was actually 4 per cent. As late as November last year, the Bank forecast that it would be the end of 2025 before inflation returned to 2 per cent. It is now widely expected that will happen much earlier than the Bank forecast.
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