Bank of England rate cut: Positive Money response

Responding to the Bank of England’s decision to lower interest rates, Danisha Kazi, Head of Economics at Positive Money, said: 

“Not only did higher interest rates do little to address key drivers of inflation, such as our reliance on volatile fossil fuels, as well as the impact of climate-change driven extreme weather events on supply chains, they have harmed efforts to fix the foundations of our economy, which require large amounts of up-front investment, such as decarbonising our energy system. 

“Now that the Bank of England is lowering rates, it should ensure this feeds through to strategically important sectors.

“The Bank should look to international examples and introduce mechanisms to pass on lower rates for green investment, which would help to accelerate the transition to green energy and build our resilience against future fossil-fuel and climate-driven inflation.”

Notes:

• The Bank of England’s current rate can be seen here: https://www.bankofengland.co.uk/monetary-policy/the-interest-rate-bank-rate  

• Reducing interest rates for green investment could save £6.2 billion for businesses and households from 2024-27 according to the New Economics Foundation: https://neweconomics.org/2023/11/its-time-for-interest-rates-to-go-green

• The Bank of England's Term Funding Scheme could be repurposed to provide cheaper funding for banks for sustainable investments, in a similar way to the Bank's 2020 scheme which offered additional incentives for lending to small and medium-sized businesses. Details of this scheme can be found here: https://www.bankofengland.co.uk/markets/market-notices/2020/term-funding-scheme-market-notice-mar-2020

About:

Positive Money is an international research and campaign organisation working to redesign our economic system for social justice and a liveable planet. Set up in the aftermath of the financial crisis, Positive Money is a not-for-profit company funded by charitable trusts and foundations, as well as small donations from its network of supporters. Find out more: positivemoney.org