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Bank of England’s wait-and-see on interest rates

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The Bank of England’s ‘wait-and-see’ stance to more interest rates has been branded as ‘dangerous’ by a leading financial advisor and fintech CEO.

The damning assessment from deVere Group’s Nigel Green follows the Bank Governor, Andrew Bailey, signalling that interest rates may have peaked but could rise again.

Speaking in London on Wednesday, Bailey said the central bank would analyse the impact of tighter policy on the economy before agreeing to new hikes.

“At this stage, I would caution against suggesting either that we are done with increasing Bank rate, or that we will inevitably need to do more,” he said.

“Some further increase in bank rate may turn out to be appropriate, but nothing is decided.”

The deVere Group CEO said, “this wait-and-see stance by the Bank of England is flawed and dangerous.

“For the economy to grow, there needs to be business investment. For business investment, there needs to be certainty, and the BoE is not providing the clarity that is desperately needed.”

He added that the bank seems to be intentionally driving the UK’s consumer-led economy into a deeper recession by continuing to make borrowing more expensive, leading to a reduction in spending and investment.

Trigger slowdown

“Inevitably, this will trigger a further slowdown in economic activity,” said Green.

Another key issue is that central bank monetary policy is notoriously slow to take effect.

“Changes in interest rates take a year to 18 months to feed themselves into the broader economy. Given the many interest rate hikes over the last 18 months, it would be astonishing if we did not see a marked slowdown in employment growth and demand over the coming months,” the deVere boss said.

The Bank’s governor said that the incoming data would add to the overall picture of the economy and the outlook for inflation, and that will inform its policy decisions.

“I suspect that the BoE already has significant data at their disposal to show that the wait-and-see approach is exactly the wrong thing to do,” Green added.

“The Bank of England’s Governor has signalled that interest rates have peaked after ten successive increases and yet he is still suggesting the possibility of higher rates.

“This will not encourage businesses to invest – especially due to the time lag of monetary policy’s effect – and the economy will slow down further as a result,” Green concluded.