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Doubt cast on interest rate cut next month

One of the Bank of England monetary policy committee members has advised against a cut in base rate on August 1.

Jonathan Haskel - in a speech to an academic body earlier this week - said he wanted to keep interest rates on hold because inflation in the jobs market was still higher than anticipated. 

Until now there has been considered a very high chance that base rate would be cut at the next meeting of the MPC, in three weeks time.


Haskel says: “There are considerable encouraging signs, most notably from normalising inflation expectations and a (spoiler: temporary) return of headline inflation to target in May 2024. However, the wage-price system in the UK has been subject to a sequence of enormous shocks over recent years. 

“The playing out of those shocks through the economy, and the continued tight and impaired labour market, means that inflation will remain above target for quite some time. I would rather hold rates until there is more certainty that underlying inflationary pressures have subsided sustainably.”

Haskel - who leaves the MPC in the early autumn - has been regarded as something of a hawk and until earlier this year wanted base rate to go up from the 5.25% at which it has been held for around a year. 

Later in his speech, a copy of which appears on the Bank of England website, Haskel says: “Assuming no further shocks … it depends on the interaction of a tight labour market and second-round effects as previous inflation works its way through the wage-price system. That previous inflation is sufficient to impart momentum to current inflation, although not as much as in the 1970s. 

“I hope this helps explain why the MPC is looking closely at labour market conditions and underlying inflationary indicators such as services inflation. The labour market continues to be tight, and I worry it is still impaired. I would rather hold rates until there is more certainty that underlying inflationary pressures have subsided sustainably.” 

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    As sure as day turns to night they will always find another reason to keen interest rates high, despite the market suggesting otherwise. We are being played like fiddles here. Banks ... wouldn't trust them with a barge pole if i had a choice!

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    Wages always lag behind inflation & now the BoE is using that lag to justify NOT reducing rates! High rates are hurting everyone - we need to start bringing them down!


    Totally agree. Perhaps this guy could clear off somewhere else and stop making people's lives a misery. Oh good he is leaving, but not soon enough!!


    ‘High rates are hurting everyone ‘
    No they’re not, please stick to the facts. Personally I am loving it and so are many other people. Maybe people that decided to take on a lot of debt don’t feel this way …just a thought !

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    If inflation is now 2 percent I thought that was there focus. Once the electrictricity price cap gets factored in inflation might even fall under 2 percent. They need to bring rates down to stop rents having to be raised up again.

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    Except Savers who were demolished by interest rates being reduced to virtually nothing all them years ago now.
    Coupled with interest only buy 2 let I think the Woolwich Building Society probably the first later gobbled up them by Mr Big,
    So everyone went buying property as they was nothing for savings, all bidding against each others driving the market sky high. So if anyone wants to reflect on the removal of Section 21 and why the Conservative lose the Election think on, it’s not just the 2.6m + landlords that’s affected but 10’s of millions of all property and Residential Home owners as well, so there’s a drop in prices in London because of the Renters Reform Bill and Removal of Section 21, do you seriously believe it only affects landlords no obviously not it affects all homeowners you silly billies.

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    "I would rather hold rates until there is more certainty that underlying inflationary pressures have subsided sustainably.” So back in the real world where real people live. How about the sustainability of mortgages and knock on effects on rents? Mine will have to go up another 10% if interest rates don't drop soon. I'd rather you dropped rates ASAP mate.

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    I had supported that the interest rate committee was taken off the Government and given to the Bankers. However, this is a lesson that power corrupts. I now believe that this committee should be a mix of bankers and Government with the Chairman being from another industry but with a proven record in a non government agency. I refer to the retired civil servant whom has had difficulties running John Lewis. Some skills just do not transfer.


    No, no, no. She has done enough damage to JLP and Waitrose, just because she ticked a couple of boxes. 😡

    Trouble is civil servants are never called to account. They are rewarded with promotions, so they should be prevented from joining private enterprise.


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