The Bank is Far Too Fixated on Cutting Rates Again

Target fixation: The Bank of England is too focused on cutting rates

by Allister Heath

Strange does not even begin to describe it. The economy has bounced back from its July wobble, and yet the Bank of England seems firmly set on its course of cutting interest rates ever lower. I find its thinking and reasoning to be well-meaning but flawed on a number of levels. Let us take each in turn.

The good news is that the Bank has admitted that its forecasts of post-Brexit Armageddon have turned out to be grossly exaggerated and it has revised up its growth forecasts. Fair enough, you may think: it now believes that the economy will grow, albeit slowly, by 0.3pc this quarter and by 0.2pc in the final four months of 2016. The Bank, like the City, has been forced into performing a u-turn, though unfortunately not before helping to rattle confidence with its ultra-bearishness.

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