The Bank of England has begun easing policy with a narrow 25–basis–point rate cut to 3.75%, but critics argue it remains too cautious as the UK economy weakens, according to Marcus Ashworth of Bloomberg. A deeply split Monetary Policy Committee reflects lingering concern over inflation, even as growth falters, unemployment rises, and key inflation indicators cool sharply. With economic contraction possible, consumer and business confidence fading, and peers like the ECB and Federal Reserve acting more decisively, the BOE is increasingly seen as lagging behind the economic reality and risking further damage by delaying deeper rate cuts.
The Bank of England is belatedly waking up to the fact that Britain is struggling. It cut its official rate by 25 basis points to 3.75% on Thursday, but it’s not really grasping that more is needed. Its statement says future judgments will be a close call — somewhat confusing as the last two decisions couldn’t have been tighter.
The vote split of 5 to 4 shows the Monetary Policy Committee tide is turning ever so slowly, with Governor Andrew Bailey jumping sides to the doves. However, four members remain adamant that the preeminent risk is that inflation remains too high. […]
After a surprisingly strong first quarter driven by inventory buildups, the UK economy has contracted since June. Another rise in the October jobless rate to 5.1%, along with a surprise downward lurch in November inflation to 3.2%, points to a bleak midwinter backdrop. As former BOE policymaker Charles Goodhart said in a Times interview this week: “I doubt if I have ever seen people in general more depressed about the state of the UK economy than now.” […]
While the BOE claims it’s hamstrung by persistently inaccurate ONS data, it’s running out of excuses. Bailey needs to lead the MPC more firmly along what’s admittedly a precarious path.
A desperate government is applying a handbrake to the regular economy, while simultaneously pushing the state-spending accelerator to the max. Above-target inflation just doesn’t fit this scenario. In the absence of competent lawmakers, Britain needs a more proactive central bank. The BOE’s failure to read the economic writing on the wall is hurting.
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