Bank of England Urged to Act on Rate Cuts Despite Inflation Slowdown
In the face of a less dramatic decrease in inflation than anticipated, the CEO of deVere Group, a prominent independent financial advisory and fintech firm, has cautioned the Bank of England against postponing interest rate reductions. The UK’s annual inflation rate experienced a decline for the second month in a row, settling at 3.2% in March.
Nigel Green of deVere Group acknowledged the data as being “slightly higher than expected,” yet he remains optimistic about the inflation outlook. Green emphasized the importance of the Bank of England not using this as an excuse to further delay rate cuts, advocating for a reduction in the current rate of 5.25% starting from June.
Andrew Bailey, Governor of the Bank of England, speaking at an International Monetary Fund event in Washington, highlighted the UK’s progress in disinflation amidst full employment. Bailey’s focus is on determining the necessary interest rate adjustments to ensure confidence in the disinflation process.
However, Green criticized the Bank’s initial inaction when prices began to rise and warned against continuing a restrictive monetary policy that adds to the challenges of UK firms and households. He argued that a rate cut would alleviate financial pressures on households, leading to increased consumer spending and economic growth.
Lower mortgage rates resulting from a rate cut could significantly benefit households by reducing monthly payments and making homeownership more attainable for prospective buyers. This would not only stimulate the housing market but also free up disposable income for consumption and savings.
Investors also stand to gain from a shift towards more accommodative monetary policy. Green pointed out that lower interest rates typically boost demand for risk assets like equities, as investors look for higher returns in a low-yield environment. A proactive rate cut by the Bank of England could energize equity markets and open up investment opportunities across various sectors.
Green firmly stated that the Bank of England must resist any temptation to delay rate cuts and should take decisive action from June onwards to support economic growth and financial stability.
