ICAEW.com works better with JavaScript enabled.

Bank of England risking a damaging overshoot on rate hikes, ICAEW says


Published: 11 May 2023

Suren Thiru, Economics Director at ICAEW, responds to today’s interest rate decision by the Bank of England’s Monetary Policy Committee (Thursday 11 May 2023):

“Another rate rise will come as a nasty blow to those people and companies already battling escalating borrowing costs and a multitude of other severe cost pressures.

“The Monetary Policy Committee needs to be more forward looking in setting interest rates rather than being overly focused on current inflation given the long-time lag between rate rises and its impact on the broader economy.

“With most of the interest rate rises yet to pass through to households and businesses, the Bank of England risks overdoing the rate hikes, adding to squeeze on our growth prospects and aggravating the cost-of-living crisis.

“Given that the Bank of England is still expecting inflation to fall back, the case for rate setters to pivot towards cutting interest rates is likely to strengthen.”

On the Bank of England’s latest Monetary Policy Report, Suren added:

“The Bank of England’s latest forecasts paint a much more positive picture of the UK's short-term growth prospects than their previous report. However, its medium-term projections suggest that our economic performance is likely to remain sluggish for the foreseeable future.

“The weak outlook for business investment is particularly concerning as it limits our ability to raise productivity, deliver a sustainably high wage economy, and if not addressed will continue to undermine the UK’s growth potential.”


Notes to editors:

Contact: ICAEW media office media.office@icaew.com, tom.mackintosh@icaew.com or 07866 853 841