Reacting to today’s decision by the
Bank of England’s Monetary Policy Committee to hold interest
rates at 5.25%, Carsten Jung,
senior economist at IPPR, said:
“Inflation is coming down much more
quickly than most recently predicted by the Bank of England. In a
large revision of its forecast, the Bank highlighted inflation
will come down to its two per cent target next quarter, before
slightly rising again. The fight against inflation is not yet
over, but the end is in sight. This is largely due to global
supply chains recovering and energy costs falling and not due to
rising unemployment, as the Bank and most economists initially
expected.
“Errors were made, regarding how we've
been tackling inflation. There was too little focus on - and
understanding of - the ripple effects of global shocks and too
much attention on people asking for a pay rise. This matters
because, as a result, the BoE tightened the screws too much. This
will hurt the recovery. Similar to the US central bank, the Bank
should reverse course and cut rates sooner this
year.
“But even though inflation is coming
down people's incomes have still not caught up with the increased
prices of the last years, with hundreds of thousands having newly
fallen into destitution. More support is needed to support them.
And we need more creative policy action to bring prices down,
including on food and energy.”
