The Monetary Policy Committee (MPC) will meet today to determine whether the Bank of England Base Rate will rise, fall, or remain the same.
The MPC cut the Base Rate from a 16-year high of 5.25% to 5% in August, and it’s remained at this level since.
However, with inflation currently sitting below the Government-set target at 1.7%, the policy members are widely expected to reduce the rate by 0.25 percentage points today.
The move would bring much-welcome relief to homeowners grappling with soaring mortgage rates, with projections that the thousands on tracker mortgages could see bills drop by hundreds of pounds a year.
Some argue the MPC should go further and slash rates by as much as 50 basis points, with the Institute of Economic Affairs Shadow Monetary Policy Committee (SMPC) calling to reduce the Base Rate to 4.5%. This comes from concerns the Bank has responded “too slowly” to monetary growth.
Andrew Lilico, chair of the Shadow Monetary Policy Committee and IEA Economics Fellow, commented: “The Bank is now claiming that inflation consistently undershooting its expectations is a surprise as inflation has fallen, just as it claimed it was a surprise when inflation consistently overshot the Bank’s expectations as it rose. Neither should have been a surprise and neither was a surprise to the Shadow MPC. The Bank should learn its lesson and pay more attention to movements in the money supply when such movements are large.
“For now, it should cut rates immediately to bring them back closer to a more neutral level. Tight policy serves no purpose at present.”
The MPC will announce its decision at midday today.
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