The Bank of England’s Monetary Policy Committee (MPC) has voted to cut interest rates. In what must feel like a novel experience for the MPC, it has finally made the correct decision. The MPC failed in its main task as it ignored the major warning signs and allowed inflation to get too high. This significantly contributed to the cost of living crisis and pushed millions of households into poverty.
Once the MPC finally decided to do its job it again fumbled the bag. It increased interest rates too far and kept them high for too long. Again it ignored all the warning signs both in terms of inflation being projected to fall below target and the impact on the real economy in terms of sluggish growth and rising unemployment. The MPC should never have raised interest rates above five per cent and it should have started cutting them and abandoning Quantitative Tightening months ago.
