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.”