Bank ‘must cut interest rates quickly’ influential economists urge

Economic experts from the IPPR thinktank say the Bank of England decision makers need to respond to lower inflation by reducing the base interest rate soon.

The Bank of England must cut interest rates quickly to boost the economy, a leading group of economists has urged.

A reduction in the base rate next month is an essential first step, according to the Institute for Public Policy Research (IPPR), which has close ties to Labour.

Pressure for a rate cut increased last week when it was announced inflation fell from 3.4% to 3% in January, which is its lowest level since March last year.

And inflation is widely expected to fall further to 2% later this year, which weakens the case for a higher base interest rate.

Many experts expect two rate cuts this year to 3%, and now the IPPR is arguing for the Bank’s Monetary Policy Committee decision makers (main picture) to move sooner rather than later.

Once inflation has fallen to 2pc, the Bank should move to cut rates more quickly.”

Joseph Evans, Research Fellow at the IPPR, says “Once inflation has fallen to 2pc, the Bank should move to cut rates more quickly.

“Its current stance, which is expected to entail one or two 0.25 percentage point cuts this year, risks running the economy too cold for too long and might leave growth on the floor.

“The Bank should clearly signal that it is prepared to go further.”

A further cut to interest rates will be needed in March.”

And William Ellis, Senior Economist at the IPPR, says: “Inflation is down 0.8 percentage points since September, pay growth has slowed, and unemployment just reached its highest rate in nearly five years.

“Measures announced in the Autumn Budget, such as support on energy bills and fuel duty, will also help to keep inflation down over the coming months,” he says.

“A further cut to interest rates will be needed in March to improve sluggish economic growth and ensure that inflation doesn’t drop below target.”

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