Bank of England rate cut: Positive Money response

London, 1st August 2024 - Positive Money responds to the Bank of England’s announcement this afternoon that it will be cutting the base interest rate by 0.25% to 5%.

Danisha Kazi, head of economics at Positive Money, said:

“Today’s rate cut will be a welcome relief for the thousands of homeowners renewing their mortgage every day, and will go some way towards alleviating the pressure on millions of others forced into debt to afford the essentials. 

“But having impoverished hundreds of thousands of people and taken 31 months to achieve their goal of lowering inflation to 2%, we must surely now accept that interest rates are a poor tool for tackling the sources of inflation.

“A cocktail of crises continue to threaten future price stability, from our changing climate to geopolitical tensions, and we desperately need better solutions than interest rates. This means the government must take a much more active role the next time prices skyrocket, with policies that target the root causes of inflation, rather than relying on blunt monetary policy tools.” 

Notes:

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

• New research shows that each day, more than 4,000 homeowners are seeing their fixed rate mortgage comes to an end: https://www.financialreporter.co.uk/4000-homeowners-face-new-mortgage-rate-rise-every-day.html 

• New data from the IFS finds 320,000 people have been pushed into poverty because of mortgage interest rate rises: https://ifs.org.uk/news/320000-people-pushed-poverty-because-mortgage-interest-rate-rises 

• The FCA’s Financial Lives survey finds millions are in debt: https://www.fca.org.uk/publications/financial-lives/jan-2024-recontact-survey-summary 

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