Bank of England has announced the base interest rate will be cut by 0.25% to 5%. This will be a welcome relief for the thousands of homeowners renewing their mortgages every day, and it will go some way towards alleviating the pressure on millions of others who have been forced into debt just to afford the essentials.
However, to achieve their goal of lowering inflation to 2%, it has taken 31 months and pushed 320,000 people into poverty due to mortgage interest rate rises. New research shows each day that more than 4,000 homeowners are seeing their fixed rate mortgage comes to an end.
While this cut may provide some temporary comfort, the reality is interest rates are a poor tool for tackling the sources of inflation.
A cocktail of crises continues to loom over our economy, threatening future price stability—from our rapidly changing climate to escalating geopolitical tensions. These are complex issues that interest rates alone cannot address. We desperately need better solutions.
It’s clear that the next time prices start to skyrocket, the government must take a much more active role. We need policies that target the root causes of inflation, rather than relying on blunt monetary tools. Only by doing so can we hope to create a more resilient economy, one that protects the most vulnerable from being pushed further into poverty.
