The Bank of England should increase the pace of interest rate cuts, following the latest inflation data which showed a decline to 1.7% in September, marking the first time in three-and-a-half years that inflation has fallen below the 2% target, according to Julian Jessop, economics fellow at the Institute of Economic Affairs.
“Today’s better-than-expected inflation data add to the growing evidence that UK interest rates are far higher than they need to be. The cooling in the labour market should also ease fears about services inflation,” said Jessop.
While he acknowledged that the September figures were influenced by fluctuations in transport costs and warned that inflation might briefly rise above 2% due to higher domestic energy bills in October, Jessop remains confident that inflation is set to remain lower than the Bank of England’s forecasts.
He added: “The Bank should therefore reduce rates by at least a quarter point at the November MPC meeting. Indeed, a large package of tax rises in the October Budget could tip the balance towards a half point cut.”
