Slash rates six times in 2025 to avoid recession, says Bank of England official after drop in inflation
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A top Bank of England official last night said interest rates may need to be cut as many as six times this year to stave off recession fears as Labour’s jobs tax bites. Alan Taylor, a member of the Bank’s rate-setting Monetary Policy Committee, said that ‘with the economy weakening, it’s time to get interest rates back toward normal to sustain a soft landing’.
Inflation worries eased on both sides of the Atlantic yesterday, boosting markets and providing respite to beleaguered Chancellor Rachel Reeves. Official figures showed UK inflation fell unexpectedly from 2.6 per cent in November to 2.5 per cent in December.
In the US it rose from 2.7 per cent to 2.9 per cent, but underlying measures were weaker than forecast. Relief: Inflation worries eased on both sides of the Atlantic yesterday, boosting markets and providing respite to beleaguered Chancellor Rachel Reeves.
Taylor said Britain was ‘in the last half mile’ on the road to bringing inflation back down its 2 per cent target. But Britain’s economic growth has been stagnating. Official figures today are expected to show GDP rose by 0.2 per cent in November after shrinking for two months in a row in September and October.
Taylor said that while he did not expect a recession ‘the risk of this eventuality has clearly been rising’. He added: ‘Right now, I think it makes sense to cut rates pre-emptively to take out a little insurance against this change in the balance of risks.’.
Taylor, who was in a minority of three voting for a rate cut in December, said households and businesses were facing a ‘cashflow squeeze’ as National Insurance hikes take their toll and the impact of interest rate hikes over the past few years continue to feed through.
