MPC Member Calls For Rate Cut

One member of the Bank of England’s Monetary Policy Committee has called for interest rates to be cut.

Professor David Blanchflower was the only member of the MPC to vote for a cut in interest rates at the January meeting, and he says that a cut is needed to prevent an economic slowdown. The other eight members of the MPC voted against a cut in the interest rate.

The primary role of the MPC is to keep inflation under control, and with inflation at 2.1% - over the 2% target – and under pressure from rising oil, food and energy prices, the vote was strongly against a rate cut in January.

Professor Blanchflower likened the concerns over inflation to ‘fiddling while Rome burns’, showing his fears for the UK economy. In essence he wished for a cut like that by the US Federal Reserve last week, which slashed interested rates by 0.75% in an attempt to calm down stock market fears of a US recession.

He urged the Governor of the Bank Mervyn King to get the Bank ‘ahead of the curve’ with so much risk to the economy, reacting with similar alacrity in the way that it did to inflationary pressures at the beginning of 2007.

“It is time for the MPC to lead, rather than follow,” he said. “Consumer confidence is low in the UK. Interest rates are restrictive at their current levels and that is why I have been voting for cuts.”

Professor Blanchflower divides his time between the UK and the US, and he believes that a recession in the US is now a matter of ‘when and for how long’, and that is a far more pressing issue in the US that its war on terror.

He added: “Britain is more dependent on the financial sector than is the case in the US. Also, the housing bubble is greater in the UK based on house price to earnings ratios.