BoE: Race to Raise Rates [Now]!

In a five-page dossier for a meeting held yesterday at Millbank I appealed to the Bank of England to start reversing its policy of Quantitative Easing (QE) and begin to raise interests now. The analysis caused surprise and a hostile reaction from participants of the meeting (I cannot publish details of the meeting before the minutes are released on the Conservative Party's site).

My reasoning was that QE has only benefitted the banking industry, which had its profit margin widen from 0.3% borrowing cost and 4.5 - 8% in lending fees; and the Government's effort to slow the pace of assuming new debt. Because of the all-time low of the interest rates, banks have been reluctant to lend money to consumers and - more importantly - to small and medium sized businesses. Banks seem to wait until interest rates are hiked by the Bank of England in order to charge more to customers, but also to be more readily willing then to lend at all.

The Governor of the BoE has recently said that inflation is rising too quickly and will soon reach 4 per cent or even higher. That is 2% above the Bank's target (and the legislative mandate).

In order to forestall this jump in the cost of living, to provide banks with more ammunition to start lending to businesses, and to spark economic activity and avoid a slump back into recession (the previous quarter showed already negative growth), I demanded that the Bank of England raises its benchmark interests today.

Now I have been called a "hawk" when it comes to fiscal and budgetary discipline. But I rather be called that than turning into a vulture feasting on the remnants of a collapsed economy.