On Thursday the Bank of England will announce its interest rate decision. The Monetary Policy Committee will likely be debating whether to increase the Bank Rate to 5.5% or keep it at 5.25%. This is the wrong debate. The MPC should instead be voting on whether or not to lower interest rates to 5% or keep them at the current rate. The right course of action would be to lower rates on Thursday.
Given that inflation is still way above the Bank’s target of 2%, it might seem odd to call for a cut to interest rates. It will certainly be a difficult call to explain to the public – and the Treasury – but it is the right one.
