Swati Dhingra, a senior member of the Bank of England’s Monetary Policy Committee, wants the interest rate to be lowered in August. She says it would save households and businesses from more financial pain. Her argument is that it is time to stop lowering living standards in order to fight an enemy that has been beaten, considering the continuous fall in the inflation rate.
On the other side, Bank of England MPC member Swati Dhingra is pushing for an interest rate cut to lighten the load on households and businesses. Dhingra was part of the minority that voted for an immediate cut in interest rates in June. Dhingra, however, insists the Bank of England needs to slash interest rates at their next meeting on August 1, stating that this would provide huge relief to households and businesses from high borrowing costs.
“Now is the right time to be bringing interest rates back to normal, so we can finally stop squeezing living standards the way we have been, trying to get inflation down. We are weighing on living standards, and that cost does not need to be paid,” Dhingra said in an interview with the Rest is Money podcast. She says high interest rates at this moment are making life hard for people, and things need to change.
The Bank of England has raised interest rates 14 times consecutively from December 2021 to August 2023, moving them from a very low 0.1% to 5.25%. This meant loans and mortgages would become very dear to all of us—tough on families, tough on businesspeople. The idea was to keep a check on price rise through the rate hike; however, Dhingra believes this is an overshot measure that hurts more than it helps.
City investors are split on whether the Bank will slice its rates next month, with a 50/50 chance priced in. But there are rumblings of dissent from inside the Bank of England. Last week the institution’s chief economist, Huw Pill, spoke of measures of inflation that remained too high for his liking. He hinted this is not the time to be slicing rates. Another MPC member, Jonathan Haskell, also mentioned that he would rather keep interest rates at current levels, which simply goes on to prove that not everyone shares Dhingra’s view.
Despite these differing opinions, Dhingra has nonetheless voted in favor of cutting interest rates. This has been the case since February when she strongly advocated doing so to help ease money matters for overburdened people. She pointed out inflation has dropped by a massive amount and is only going to continue sliding. The consumer prices index – which measures how much the prices of goods and services have changed – fell to 2% last month from 2.3% in April. That matches the Bank’s target and suggests inflation is finally under control.
Dhingra also mentioned that producer prices, which presage changes in consumer prices are falling lately. That’s an indication that consumer prices are likely to continue their decline. “We still think there is more to come in terms of deflationary forces, including if you look at non-energy services which is what people have been concerned about,” she added.