Interest rates could be “taken down to two per cent” within months, according to a former Bank of England adviser.
Dr Roger Gewolb told GB News he thought the base rate should be cut now as he suggested how he thought the central bank should reduce interest rates.
Interest rates have been kept at 5.25 per cent for the past six months following multiple rate hikes to ease inflation from the Bank’s Monetary Policy Committee (MPC).
However, analysts are betting on the base rate being cut significantly later this year and into 2025 with “one caveat” jeopardising this forecast.
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Dr Roger Gewolb shared his thoughts about the Bank of England's decision-making with GB News
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Speaking to GB News, financial commentator and founder of the Campaign for Fair Finance Dr Gewolb said: “He [Andrew Bailey] should be lowering rates now by a quarter of a percent and bringing them down fairly soon to about four per cent to give some breathing space to the country.
“It's not going to make a gigantic difference except in people's lives and businesses that could fail otherwise, and it will get lenders starting to lend more assertively again.
“From there, I think he can take it down to the two per cent rate over time this year or next year.”
Last week, the Bank of England’s governor Andrew Bailey suggested interest rates could be slashed before the Consumer Price Index (CPI) rate falls to the desired two per cent target for inflation.
Previously, the Bank has indicated a cut to interest rates would only be on the cards if CPI inflation fell to two per cent.
Dr Gewolb warned that there is “one caveat” that he thinks could affect inflation and the wider economy going forward.
He added: “The inflation that we have will probably fall to two per cent sometime later this year. Maybe in May, maybe thereafter.
“The one caveat is the wars in in Ukraine, Gaza and the Red Sea. If all of that escalates into a larger struggle and that drives up the price of oil, then there's your example of cost push inflation.
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The Bank of England base rate is at a 15-year high of 5.25 per cent GB NEWS“The price of oil is being driven up because just the Red Sea is 25 per cent of the world's oil and 15 per cent of the world's shipping.
“If that's impaired, the prices will go up. Mr Bailey [better] well not raise interest rates because of that because it's got nothing to do with us.”
Business leaders, including the CEO of Tesco, have previously warned the attacks from Houthi rebels on Red Sea vessels could contribute to a hike in inflation.
According to Dr Gewolb, the Bank of England is “waiting too long” to cut interest rates at a time when inflation could rise once again.