High interest rates are stifling UK economy, she warns
A Bank of England policymaker has expressed concerns that elevated interest rates are burdening UK households and hampering economic growth.
Swati Dhingra, a member of the central bank’s Monetary Policy Committee (MPC), said borrowing costs remain too high, suppressing consumer spending and discouraging business investment.
Dhingra, who has consistently advocated for lower interest rates since her appointment to the MPC in September 2022, argued that the current 4.75% base rate is limiting the economy’s ability to expand. Speaking to Bloomberg TV, she noted that households and businesses are struggling under the weight of restrictive monetary policy, alongside broader economic challenges.
“We’re really paying the price,” Dhingra said. “Consumption has been very weak, and businesses have been telling us for months that they’ve reduced investment due to the broader macro outlook and the increasing cost of financing those investments.”
Dhingra also pointed to weak consumer spending and declining business confidence as key risks to the UK’s economic recovery.
“It’s a combination of factors: weak consumption, weak investment, and potential damage to supply capacity,” she explained. “That’s why I believe we should be easing policy more.”
While Dhingra avoided commenting directly on recent fiscal measures introduced by Chancellor Rachel Reeves, she suggested that tax increases and other economic headwinds are adding to the pressure on businesses.
Her remarks come ahead of the Bank of England’s December meeting, where interest rates will again be under review. Dhingra’s comments indicate she is likely to support another rate cut to stimulate the economy.
“I think we’re at a very restrictive stance right now,” she said. “It’s weighing on living standards, supply capacity, and investment. We need to start unwinding this to some degree so we can normalise the economy.”
Her dovish stance contrasts with that of other MPC members, who have emphasised the importance of maintaining higher rates to curb inflation, which remains above the bank’s 2% target. The MPC’s next rate decision is set for December 19, with markets closely watching for signs of a policy shift.
Analysts are divided on whether the central bank will lower rates this month, given the delicate balance between supporting growth and managing persistent inflation. However, Dhingra’s warning underscores the growing tension between monetary policy and the challenges faced by households and businesses in a high-rate environment.
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