deVere Group CEO Nigel Green has branded the Bank of England’s ‘wait and see’ stance on interest rate hikes as flawed and dangerous.
Green’s warning came after Bank Governor Andrew Bailey signalled that interest rates may have peaked but could rise again. Speaking on Wednesday, Bailey said the central bank would analyse the impact of tighter policy on the economy before agreeing to new hikes, adding “nothing is decided.”
Green said: “For the economy to grow, there needs to be business investment. For business investment, there needs to be certainty, and the Bank of England is not providing the clarity that is desperately needed.
“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. Inevitably this will trigger a further slowdown in economic activity.”
Green also warned that central bank monetary policy is “notoriously slow” to take effect, with interest rates taking 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,” he continued.
The Bank’s governor said that incoming data would add to the overall picture of the economy and outlook for inflation and will inform the Bank’s policy decisions.
“I suspect that the Bank of England already has significant data at their disposal to show that the wait-and-see approach is exactly the wrong thing to do. The Bank of England’s Governor has signalled that interest rates have peaked after 10 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,” he added.
