This morning, the governor of the Bank of England and members of the Monetary Policy Committee (MPC) appeared in front of the Treasury Committee to discuss inflation, interest rates, and the UK economy.
Ahead of this, Newspage asked financial services experts how they would you rate the Bank of England’s performance over the past two to three years — and whether the Monetary Policy Committee is in touch with everyday businesses and households.
Reaction:
Philip Dragoumis, director and owner at Thera Wealth Management:
“The Bank of England, just like all of the central banks, has had a tough time trying to navigate the unprecedented economic effects of Covid since 2020.
“With hindsight, it should have perhaps raised rates in 2021 when it was clear inflationary pressures were building up.
“Now, however, Andy Haldane is absolutely right.
“Waiting for the US, which is booming, to cut rates first, risks destroying the UK economy.
“Rates need to be cut now before it’s too late.
“The UK’s economy has been in a GDP per capita recession over the past two years, and inflation could potentially have a 1 handle this year as natural gas prices are at all-time lows.”
Akhil Mair, director at Our Mortgage Broker:
“The Bank of England’s delay in reducing interest rates is frustrating.
“The economy urgently needs action, yet Threadneedle Street seems indifferent to the immense suffering of businesses and individuals.
“Their slow response worsens our challenges, showing a lack of foresight.
“Their heavy reliance on quantitative easing backfired, driving inflation to double digits and harming household budgets.
“Waiting for others to act is senseless; the UK must lead in monetary policy to safeguard our economy.
“The Bank of England must act decisively now to avert an even deeper recession.”
Riz Malik, founder and director at R3 Mortgages:
“Unfortunately, the Monetary Policy Committee have neither the courage, capacity or capability to make the right decisions hence why they had to call in Ben Bernanke to mark their homework.
“They need to stop looking solely in the rearview mirror and apply common sense to monetary policy before it is too late.”
Craig Fish, director at Lodestone Mortgages & Protection:
“The Bank of England and the MPC have performed woefully over the past few years.
“Far too late to the party to tackle inflation head on, and constantly banging the same drum that the plan is working and they must stick to it. Now we have an economy that is in recession.
“The MPC members are out of touch with reality and certainly the majority of people and businesses the length and breadth of the UK. Change is needed.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“If the Bank of England were receiving an Ofsted rating for their performance, it would be grade 4: Inadequate.
“They have constantly used a base rate rise hammer on the inflation screw destroying the economy in the process.
“The type of inflation experienced hadn’t been from excess spending but other geopolitical factors, so the constant rate rises only poured misery on millions of households already feeling the squeeze and inflation still remains over double their desired target.
“Even in their latest meeting, two members of the Monetary Policy Committee voted for raising the base rate further, which shows how completely out of touch they are with life in the real economy.”
Ranald Mitchell, director at Charwin Private Clients:
“The Monetary Policy Committee were slow to act when inflation started rising and had to increase rates sharply in an attempt to bring it back under control.
“Inflation remains annoyingly stubborn and if it’s not brought under control very soon, the knock on effects to the UK economy and households may be grave.
“With a 3-way split on Committee votes, too, it shows there is internal disagreement over what’s best for the UK and the economy as a whole.”
Samuel Mather-Holgate, independent financial adviser at Mather and Murray Financial:
“The Bank of England has been like a blind person swatting a fly, following the data they hear and not able to anticipate.
“They were too slow to increase rates, and they have been too slow to cut rates. In fact, two of the Monetary Policy Committee voted to raise rates at their last meeting.
“The Governor has a lot of questions to answer and this Treasury Select committee will see him pleading to keep his job.
“The central bank had been blessed with dynamic people in King and Carney, but it just hasn’t got that now.”
Wes Wilkes, CEO at Net-Worth NTWRK:
“It’s pretty clear that the Bank of England has performed poorly over the past two to three years, being recklessly late to accept the inflation issue and, when they did take action, they were rather limp in response.
“It’s difficult to be in touch with everyday businesses and households and so a data-led approach is the most logical one, albeit this often comes with a lag.
“Whilst the UK did dip into a technical recession, wage growth and the consumer remain reasonably strong and so there does still remain a potential inflation risk to the upside, which is likely to keep see the Monetary Policy Committee remain cautious around any early rate cuts.
“The UK seems to be somewhere between the particularly strong US and the incredibly weak Eurozone.”
Bob Singh, founder at Chess Mortgages:
“With so many cogs in the economic machine, it can be a daunting task to keep them all turning at the right speed and in the right direction.
“The Bank of England has been criticised from all quarters, but it’s got to keep an eye on several factors and metrics not least the exchange rate to keep trade stimulated.
“The economic climate now is such that action has to be taken to prevent a deep recession, but Threadneedle Street may need to stop looking across the pond and take the lead first and cut rates sooner than later.
“Inflation is still double the target so the pain may have to be endured for a few months more.”
Michelle Lawson, director at Lawson Financial:
“I have always thought that constant rate rises without pausing to gauge their impact isn’t right.
“I also think all those in the higher echelons of business and finance are out of touch with real life in the real world.
“This country seems bent on going with history says but, as things have been recently shown, just because that is the way things have always been done it doesn’t mean it is the way things should be done.
“History should teach us the future as this is how we should learn to be better.”
Chris Barry, director at Thomas Legal:
“The Monetary Policy Committee admitted they got it wrong. Interest rate rises should have taken place much sooner and the curve much softer.
“Interest rate rises is not the only way to tackle inflation and with millions of people still to feel the pain of rolling off their cheap fixed rates, delaying rate reductions could be catastrophic.
“The inflation target of 2% is not backed up by the data and data has not been published to show how the economy would react to longer term inflation at 4%.
“The reality is borrowers are struggling and the worst is yet to come.”
Scott Taylor-Barr, principal adviser at Barnsdale Financial Management;
“Whilst the MPC at the Bank of England have a target level of inflation to work towards, they are not solely responsible for UK inflation, nor are they the only group with the tools to tackle it.
“Sadly, central government chose to leave the problem at their door, allowing them to have a scapegoat for poor performance when inflation didn’t fall (whilst of course taking the credit when inflation did fall).
“At any point, the Government could have had an immediate and more marked (and arguably more equitable) impact on inflation by increasing income tax, VAT, or NICs as these reduce the spending power of everyone at the same time, rather than putting all the pressure on the few mortgage borrowers whose deals happened to the ending at the wrong time; they took the decision not to and left the entire responsibility with the Bank of England.”
Mark Robinson, managing director at Albion Forest Mortgages:
“While I think the Bank of England may have been a bit keen with some of their rate rises and could have waited for them to have an effect, and at other times far too late to react, overall I would say they have done an ‘okay’ job of keeping things under control.
“I do think they need to start considering lowering the base rate, whilst we have hit a ‘technical’ recession, things are still looking up.
“Whilst them lowering rates is important, from a housing industry perspective, the government need to do more to encourage home buying.”
