//

BoE makes ‘another mistake’ by holding rates, Fed cut ‘welcome’

2340 views
2 mins read

The Bank of England has made “another mistake” by not accelerating interest rate cuts, according to the CEO of a leading independent financial advisory and fintech.

deVere Group’s Nigel Green spoke out after the central bank’s decision on Thursday to hold rates steady at 5% after last month’s initial reduction.

As inflation eases and economic pressures mount, deVere asserts that the Bank’s reluctance to push forward with further cuts risks stifling growth and prolonging financial uncertainty for businesses and consumers alike.

“This is no time for hesitation. The Bank of England’s decision to pause rate cuts is a missed opportunity. They need to adopt an aggressive approach now to further lower borrowing costs, drive growth, and restore confidence in the UK economy.”

Green said that holding interest rates steady, “may seem like a cautious move, but it fails to address the urgent need to support economic recovery and competitiveness.

“High borrowing costs continue to burden businesses, particularly in key sectors like manufacturing, retail, and housing, where investment has slowed, and costs remain high.”

deVere Group believes that accelerating rate cuts will not only provide relief for businesses and households but will also stimulate spending, encourage investment, and drive economic momentum.

“The risks of delaying further cuts — such as prolonged stagnation and a slow recovery — far outweigh the benefits of a wait-and-see approach,” commented Green.

A key factor to consider is the inherent time lag between monetary policy decisions and their effects on the broader economy.

“Interest rate cuts can take months to fully filter through to the real economy, impacting borrowing, investment, and consumer spending.”

Delaying recovery

By delaying further rate reductions, the Bank of England risks extending the recovery timeline, as businesses and households will not see the benefits of lower rates for some time.

Wednesday’s decision by the US Federal Reserve to aggressively cut rates for the first time – and moving forward into 2025 – highlights the urgency of action.

The Fed’s decision to slash interest rates by 50 basis points — its first cut in four years — has been welcomed by investors and market participants.

However, Green said that the Fed “must not lose its nerve” and needs to remain aggressive.

He explained that this larger-than-expected cut, as against an anticipated 25bps cut, “is an encouraging step in the right direction. But to truly realise the long-term benefits of this decision, the Fed must continue to show resolve. It needs to keep up the pace with further rate cuts, with another 50 basis points in December and more into 2025.”

Central banks must remain flexible and responsive to rapidly changing economic conditions, explained Green, and the Fed’s move reflects its commitment to avoiding stagnation and supporting growth.

“The Bank of England risks lagging behind. By holding rates, the UK misses a key opportunity to seize a competitive advantage in the global market,” affirmed the deVere CEO.

He concluded that the BoE needs to be bolder, faster, and more ambitious in its policy decisions.

“The time for aggressive rate cuts is now, before the UK risks losing its edge.”

“The Bank failed with its inaction at the start, passively standing by for too long when prices were already starting to surge.

“It mustn’t fail now with adherence to an unnecessarily restrictive monetary policy which is exacerbating the challenges faced by firms and households across the United Kingdom.”