McDonnell expects interest rate reduction but level of cut debated

Ryan Fowler

August 4, 2016

Shadow chancellor John McDonnell has said an interest rate reduction is ‘inevitable’ but the level of such a cut is being widely debated by commentators.

Speaking to Radio 4’s Today Programme he said “a small cut is almost inevitable” and backed former Monetary Policy Committee member Danny Blanchflower’s call for a VAT cut to further stimulate the economy.

McDonnell said: “It’s a very creative idea – we need a stimulus like that.

“I want to see the government now looking at its investment stratetegy

“The Chancellor, has said he’s not going reset the government’s fiscal rule or its economic strategy until the Autumn. And I think that’s too late. We need action now!”

But Blanchflower was less than impressed by either of the main political parties plans for the economy. He took to twitter and said:

Cut predictions

Banks and investment firms have differing opinions on the depth of any cut.

Investment bank JP Morgan and online financial analysis 4Cast are predicting a 0.5% rate cut dropping the rate to zero – the lowest level ever in the Bank of England’s 300 year history.

Meanwhile BayernLB, Julius Baer and SEB are predicting that there will be no change and that the rate will continue at 0.5% for the 89th successive month.


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