IoD press release Bank needs to take care that the ‘necessary recession’ is as short and shallow as possible
Commenting on the decision of the Monetary Policy Committee of the Bank of England to raise interest rates by 0.5 percentage points to 3.5%, Kitty Ussher, Chief Economist of the Institute of Directors, said:
“From a business point of view, if higher interest rates are required now to stabilise prices in future, then the resulting ‘necessary recession’ should be as short and shallow as possible.
“With the labour market starting to turn, the economy already contracting and base effects from last year’s price rises expected to bring next year’s headline inflation rate down automatically, it is important that the Bank does not tighten too far and risk prolonging the pain. Not only would that be bad news for households and businesses, but it would also risk the Bank undershooting its own inflation target in the future.
“On balance, while today’s rise may be justified, given the long lead time between interest rate rises and the impact on demand, we may soon be getting to the point where enough has been done.”
