Has the Bank of England forgotten what its job is?

Coffee House Shots

The Spectator

News, Politics, Government, Daily News

4.4 • 2.1K Ratings

🗓️ 7 August 2025

⏱️ 15 minutes

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Summary

Some excitement on Threadneedle Street today after the Bank of England cut interest rates to 4 per cent. The Bank’s Monetary Policy Committee (MPC) has just voted five to four – after a revote – for what is the third cut this year. This takes interest rates back down to levels not seen since the beginning of 2023. Concerns about an increasingly slack labour market seem to have driven the MPC’s decision.

This sounds like good news – and Starmer will welcome it as such – but the Bank’s apparent comfort with loosening policy in this context is baffling says Michael Simmons. Its own forecasts show inflation climbing back to 4 per cent by September – double the official target. If they’re wrong, and inflation slips the leash again, it won’t be brought back under control easily. This also coincides with yesterday’s news that the National Institute of Economic and Social Research (NIESR) forecast that Rachel Reeves must find £50 billion of revenue or cuts if she is to return to the £9.9 billion of fiscal headroom she left herself in the spring. Are there any rays of light escaping from the black hole as we head towards autumn’s Budget, or is it all gloom?

Also on the podcast today: Trump’s tariffs have come into effect across the world. He declared on Truth Social that ‘Billions of Dollars have started flowing into the US’… but is that true? And what’s been the reaction in the US?

Oscar Edmondson speaks to Michael Simmons and Kate Andrews.

Produced by Oscar Edmondson and Patrick Gibbons.

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Transcript

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0:00.0	Hello and welcome to Coffee House Shots, the Spectator's Daily Politics Podcast. I'm Oscar
0:10.2	Edmonton, and I'm joined today by Kate Andrews and Michael Simmons. Now, Michael, today, there's been
0:15.5	some mild excitement on Threadneedle Street. Can you tell us about it? Well, I'd say it's more than mild.
0:21.0	It's been very exciting day because we had the interest rate decision from the bank at midday to day.
0:28.0	And they decided to cut interest rates to 4%.
0:31.9	Now, that isn't exciting in itself because markets were expecting this and they'd priced in something like 93%
0:40.2	probability that this cut was going to happen. But what's exciting is about how it happened. For the
0:46.8	first time since 1998, we had a re-vote and that was because the vote split 5-4 of the nine-member committee but one of the five that
0:59.6	voted for a cut actually voted for half a percentage point cut so they wanted it to come down even
1:05.0	further than it went so the governor then called a second vote and eventually they agreed on, they agreed on five, four in
1:12.6	favor of this cut. But I think it's a really interesting decision because at the same time as
1:20.7	this, the governor's basically, you know, put out this statement saying, we're worried about
1:24.6	inflation. If you read what the bank's written in their sort of report
1:28.8	that accompanies this, they specifically blame Rachel Reeves for that inflation. They talk about
1:34.0	increased costs on employers, which is obviously referring to the national insurance tax,
1:39.5	etc, etc. But I think what's even more interesting and exciting and scary than all of this
1:46.5	is what they've said specifically about inflation. They see it rising now to 4% in September,
1:53.0	which would be double the bank's mandated target. For that reason, you actually had the bank's
2:00.4	chief economist and also the deputy governor
2:03.0	responsible for monetary policy opposed to a cut because they're worried about inflation
2:09.9	and that's why it came it came in so tight and I think it's going to be a really interesting
2:16.4	thing to watch because if inflation,
	...

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