Bank should cut interest rate to at least 4% next month, say former deputy governor
The Bank of England should cut its interest rate to at least 4% next month to deal with the economic turmoil caused by Donald Trump’s tariffs, one of its former deputy governors has said.
Charlie Bean told The Guardian an aggressive strategy was needed to cope with the fallout of the US-instigated trade war, which he believes will force businesses to delay investments and damage consumer spending.
“It is not just the tariffs that are the problem, it is the huge uncertainty these actions have created, delaying buying and investment decision by businesses and consumers,” he said.
While he said the tariff situation was not as serious as the 2008 financial crisis, a similar approach to interest rates should be taken.
During the financial crash, the Bank made the surprising move of cutting its rate by 1.5 percentage points.
Bean, who was the deputy governor for monetary policy at the time, said: “It was huge and it needed to be.
“The tariff situation is not of the same magnitude but this is a disinflationary shock and an event that the bank should react to, and react very strongly.”
Financial markets are now pricing in three interest rate cuts this year, taking it to 3.75% by December.
Many economists are expecting a 0.25 percentage point cut to 4.25% in May.
