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Cut the base interest rate to prevent stagnation - or worse!

Journalist: Sarah O'Grady, Daily Express

ended 31. January 2024

A group of independent economists got togther by the free amrket think tank the Insitute of Economic Affairs, has called for interest rates to be cut at tomorrow's (Thurs) MPC meeting. They warning of stagnation or recession if the economy isn't boosted. 

Am looking for comments agreeing with their call and think that a fall in interest rates will give the economy a lift.

 

17 responses from the Newspage community

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Riz Malik
Independent Financial Adviser at R3 Wealth
The base rate should be cut tomorrow by 25 basis points. Given the current state of the UK economy, which is struggling significantly, there's a need for economic stimulation. Additionally, lowering the rate would likely have a beneficial psychological effect as well for households and businesses alike.
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Michelle Lawson
Director at Lawson Financial
The more I see and read the more I agree with this. We seem to be on the fast path to self destruct at this rate. As recent stats have shown, businesses are closing at the fastest rate since the 90's. People are desperate financially and we are seeing more and more poor credit and insolvencies. We need some money back in pockets sooner rather than later or UK plc will be simply bust.
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Ben Perks
Managing Director at Orchard Financial Advisers
A reduction in rate would be amazing.

Over the last few weeks we have seen; the rate of inflation increase marginally, grim insolvency figures for last year, HMRC figures for residential transactions showing a significant decrease and SWAP rates that have started to climb.
It doesnt paint the prettiest of pictures for the state of our economy.

A reduction in Base Rate could stimulate things and give consumers a long overdue boost in confidence. It would be very welcome news and could have fantastic ramifications across multiple sectors.

In reality though, i think we will be fortunate to experience another hold at 5.25%. The vote to hold at the last meeting by members of the MPC was split, with a few wanting to increase.

So whilst it would be magnificent to see a reduction, i think its unlikely this time around. But it will come in the not too distant future... hopefully.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
If the Bank of England’s mandate was a successful economy they wouldn’t have hiked rates so high and they would be slashing them now. Unfortunately for UK plc, inflation is top of their priorities and they won’t be cutting the borrowing rate any time soon. The economy will be in the bin by the time Andrew Bailey signals a retreat and it will be too late for many good British businesses.
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Kate Allen
Owner at Finest Stays
Now is the moment for decisive action—to halt the encroaching stagnation that threatens our economy. If The Bank of England hesitates, it could eerily echo the inaction witnessed in past crises. Let's hope we get the essential stimulus to reinvigorate economic growth and avert the economy's potential descent into turmoil.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
It's time for Bank of England to give a much needed boost to the economy and cut rates by a quarter percent, much against expected forecasts. Stagnation or recession must be avoided, and easing the current economic stranglehold will go some way to acheiving this. A rate cut will also provide elements of optimism and confidence, that we are turning a corner in the ongoing inflation battle.
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Gary Bush
Financial Adviser at MortgageShop.com
Cutting the Bank of England base rate is on my New Years resolution list, pity I am not a member of the monetary committee though - those guys are 50/50 on just holding the rates as they are. The Insitute of Economic Affairs is right to come out raging for an interest rate cut as soon as possible - it seems that they are very much listening to the people on the street and rightly fearing the possibility of us following Germany into a stagnated recession. With fixed mortgage rate reductions from lenders of late bringing a spring in the step of the UK general public if a reduction in the Bank of England base rate comes it will be hard to not put out the bunting and have street parties. Mortgage account holders monthly budgets have been dramatically hit for the past 18 months and some relaxation of stress is very much needed.
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Graham Cox
Director at Bridging Hub
A base rate cut is long overdue. The Bank of England are fiddling whilst Rome burns, failing to recognise just how badly the economy is being hit by high interest rates. Just as they dawdled when inflation raised it's ugly head, they're now reacting too slowly as the cost of living and massively higher mortgage and rent costs impact people's lives.
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Richard Thompson
Director at Abbeydale Mortgages
I agree with the proposition for a base rate cut. I believe that even a modest reduction, such as 0.25%, would instil greater confidence in the market by signalling a gradual decline in interest rates. I anticipate that such a measure could stimulate an increase in the number of first-time buyers, which is particularly crucial given the recent months of diminished house transactions
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Ying Tan
CEO at Habito
2023 was a super challenging year for everyne, ranging from homeowners, first time buyers, renters to businesses. The painful double whammey of high inflation, and rising interest rates has hit hard. A base rate cut would certainly be welcome, and encouraged to stimulate the economy keeping stagnation or a recession at bay. Lets get confidence back, and inject some life into the economy.
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William Page
Head of Global Sales at IP Global
A rate cut would be a lifeline for sluggish sectors. Cheaper loans would encourage investment, create jobs, and boost overall economic activity. It's a win-win for businesses and workers alike.
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Akhil Mair
Director at Our Mortgage Broker
Interesting proposition from the free-market aficionados at the Institute of Economic Affairs. A 0.25% rate cut might indeed align with the plummeting inflation rates we've witnessed. However, are we risking a race to the bottom? While a boost is enticing, let's ensure it doesn't turn into a spiral of diminishing returns. Time for a delicate dance between stimulating growth and avoiding the pitfalls of over-reliance on rate cuts.
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Amit Patel
Adviser at Trinity Finance
The Bank of England must cut the base rate by 25bps or push the UK economy an inch closer towards a recession. The majority of the MPC are out of touch with reality and could have done more to alleviate the pain on householders by voting for a base rate reduction sooner.

The whole make up of the MPC needs a drastic overhaul. We need a more diversifed membership from all walks of life, not the elite and priveledged or from a banking background.

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Richard Jennings CeMAP
Founder & Managing Director at Richard Jennings Mortgage Services
A base rate cut would be a much needed lifeline to breathe life into a flat housing market. Lenders are doing what is within their powers by lowering rates for new business but this alone won't provide the confidence needed to stimulate movement in the housing sector.
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Austyn Johnson
Founder at Mortgages For Actors
Peope are really suffering at the moment and are struggling with the costs of living, if a rate cut could help them, its the governments responsibility to do it. They cant just look at figures on a graph, they need to consider the people out there too.
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Jake Stott
Founder at Knox Mortgages
Everyone's got an eye on the Bank of England right now, and I reckon those economists are spot on. We need a break, and we need it now. Drop those interest rates, and you'll see more than just numbers perk up; you'll see people's spirits lift. We're talking about real folks wanting to buy real homes, not just investors playing Monopoly. A cut in rates? It's the leg-up young families and first-timers buyers are so desperate for. Let's stop the chin-stroking and start the action. It's about time we got this economy buzzing again.
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Natalie Ormond
Owner at Smallkind
I'm not a finance expert but a base rate cute would bring our mortgage down and give us a bit of hope that there is light on the horizon. I suspect I'm not alone in feeling that we just need to see some sign that the cost of living crisis is not forever. Hopefully, people will then feel more confident to spend and support small businesses over 'fast fashion' type retailers as many small brands are really struggling.