Cut interest rates now...or risk UK falling into damaging recession

ECONOMISTS have urged a cut in interest rates, warning that keeping them "too high for too long" could tip the nation into a needless recession.

- Rob Kellaway

It came as inflation fell further and faster than expected, to 3.9%, yesterday.

The sharp drop was well inside Prime Minister Rishi Sunak's target of 5.3% by the end of 2023 and marked the lowest price-rise level for more than two years.

However, one think-tank fears the Bank of England is repeating its error of 2021, when it did not react fast enough to changes in the economy and allowed inflation to rocket to 11% last year.

Julian Jessop, of the Institute of Economic Affairs, said: "After being too slow to raise interest rates in 2021, when inflation was soaring, the Monetary Policy Committee now looks set to leave rates higher for longer as inflation plummets.

"Last month, the Bank was forecasting that inflation would still be 4.4% in the first quarter of 2024 and not return to the official target of 2% until the end of 2025.

"We have now learned that it has already fallen to 3.9% in November.

"What's more, almost every piece of new evidence suggests that inflation will continue to fall sharply in the New Year, just as it has in the US and most of the rest of Europe.