Falling inflation should encourage Bank of England to cut interest rates – IPPR

Arsten Jung, senior economist at the Institute for Public Policy Research (IPPR), has welcomed the latest inflation figures, but warned of potential challenges facing the Bank of England.

According to Jung, the temporary dip in inflation towards the Bank of England’s 2% target was a welcome development.

However, he emphasised that wages were still struggling to catch up with the post-pandemic surge in prices.

Jung also expressed concern over the Bank of England’s current stance on interest rates, suggesting that they have been set “too high for too long.”

He said: “The Bank has tightened the screws too much and this will hold back the economy and wage growth going forward.

“They recently admitted that inflation is falling faster than it originally thought, suggesting an earlier reversal in policy.”

Reflecting on the broader economic response, Jung critiqued the Government’s approach to inflation management.

Jung suggested that the Government could still take further action, particularly regarding corporate profits.

He concluded: “Looking back, it is clear that the Government could have done more to shield people from inflation.

“Other countries like France and Japan were more proactive in easing price increases and did more to stop firms from amplifying inflation via shielding their profits.

“Especially on profits there are still actions it can take.”