Bank of England must ‘do the right thing’ and cut rates in summer

The Bank of England must not be tempted to use a smaller-than-expected drop in inflation in March to delay interest rate cuts further, warns the CEO of one of the world’s largest independent financial advisory and asset management organisations.
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The warning from deVere Group’s Nigel Green comes as the UK’s annual inflation rate fell in March for a second consecutive month, dropping to 3.2%.
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He says: “The latest data is slightly higher than expected, but the overall outlook for inflation is positive.
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“We hope that, despite the last stretch to hitting the Bank of England’s 2% target being harder and slower, overly cautious officials will not see this as yet another reason to further delay rate cuts.
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“They must begin to bring down the historically high rate of 5.25% from June onwards. No ifs, no buts.”
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Bank of England governor Andrew Bailey told an International Monetary Fund event in Washington: “In the UK we’re disinflating at what I call full employment…Our judgement with interest rates is ‘how much do we need to see now to be confident of the [disinflation] process’.”
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The deVere CEO notes: “Mr Bailey and his team need to hold their nerve and be proactive. This summer is the time for the central bank to act decisively and promptly.
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“The Bank of England failed with its inaction at the start, passively standing by for too long when prices were already starting to surge.
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“It mustn’t fail now with adherence to a restrictive monetary policy which is exacerbating the challenges faced by firms and households across the United Kingdom.”
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Speaking last month, Nigel Green told the media: “Households stand to benefit significantly from a rate cut, as lower mortgage rates translate into reduced monthly payments, freeing up disposable income for consumption and savings.
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“Additionally, lower borrowing costs make homeownership more accessible for aspiring buyers, thereby stimulating demand in the housing market.
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“By easing financial burdens on households, a rate cut would bolster consumer confidence and spending, driving economic growth from the ground up.”
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Investors, too, have much to gain from a shift in monetary policy towards accommodative measures.
Lower interest rates tend to fuel demand for risk assets, such as equities, as investors seek higher returns in a low-yield environment.
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As equity markets thrive on the prospect of easier monetary conditions, “a rate cut by the BoE would help drive stock prices and unlock investment opportunities across various sectors.”
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The deVere CEO concludes: “The Bank of England mustn’t be tempted to delay rate cuts any longer. They must do the right thing and cut from June onwards.”