Every time Chancellor Rachel Reeves opens her mouth, a little more growth dies (Image: Getty)
Today, , exactly as everybody expected. That’s the third cut since August, when rates peaked at 5.25%.
Yet two of the BoE’s nine-strong monetary policy committee (MPC) pushed for a bigger 0.5% rate cut to help revive the ailing UK economy.
The BoE also published its GDP growth forecast for the UK economy in 2025 today. And it’s grim.
It slashed its previous forecast in half. Instead of growing a modest 1.5% in 2025, GDP is now expected to rise by a barely there 0.75%.
Further evidence of how the ‘Wrecker’ Reeves took a fragile economic recovery and squashed it flat.
Today’s MPC minutes said GDP growth was weaker than expected as “business and consumer confidence have declined”.
They certainly have.
Pretty much everything started to decline, the moment Reeves opened her mouth and started talking the UK economy down last July.
She followed this with £40billion worth of tax hikes in her October Budget, the biggest Treasury raid for 30 years.
The centrepiece was the massive hike to employer’s national insurance. Bosses have responded by axing jobs, cutting hiring, hiking prices and reducing investment.
Try and pick the growth out of that!
The Budget even gave inflation another nudge upwards, leaving the BoE stuck.
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To be fair, other forces are squeezing growth. Global energy prices have increased, and Reeves can’t do much about that.
There’s not much anybody can do about President , whose planned corporate tax cuts and trade tariffs will also fire up inflation.
But Reeves picked a terrible time to go nuclear on tax. While borrowing an extra £30 billion a year, .
More tax hikes and spending cuts may follow, .
The BoE’s downgrade is a serious blow to Reeves, who has started banging on about growth but has no idea how to generate it.
Especially with Energy Secretary Ed Miliband trying to sink it, by blocking North Sea oil and gas fields worth billions.
The BoE isn’t just stuck between a rock and a hard place, but Miliband too. Not a nice position to find yourself in.
Where it goes from here is anybody’s guess. Two more rate cuts? Three? Four? None? I’ve seen every prediction.
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Worse, consumer price inflation isn’t dead yet. Remember last September, when it fell to 1.7%? By December, it had edged back up to 2.5%.
The Bank now predicts it will hit 3.7% in the summer. Reeves could drive it higher still if she hikes fuel duty in her Spring Statement, as anticipated.
Deputy PM ‘s decision to allow council tax hikes of up to 10% won’t help either.
The pound is falling after today’s rate cut. That will throw more fuel on the inflationary fire by making imports even more expensive.
This is the cost-of-living crisis that just won’t die. In contrast to the UK economy, which has flatlined.
Along with . I suppose that’s something.