THE Bank of England Monetary Policy Committee (MPC) yesterday made the surprise decision to hold UK interest rates at 5.25% instead of the widely predicted increase to 5.5%.
Since December 2021 the Bank has made 14 consecutive interest rate increases with the aim of dragging the UK economy out of its inflationary spiral by driving up the cost-of-living and borrowing, forcing workers to spend less.
Inflicting pain and mass poverty on the working class was the way to drive down inflation for the majority of the Bank’s rate setters previously.
The fact that this policy also had the effect of driving British capitalism over the edge and into economic recession as debts became increasingly unaffordable for business and corporation, was the balancing act that caused splits within the Bank’s economists.
Yesterday the Bank’s rate setters grasped at the straw of a slight fall in the rate of inflation – as measured by the CPI index – in August.
Data released on Wednesday showed a tiny fall in the CPI rate from 6.8% in July to 6.7% in August.
This was enough to send the Bank and its chief economists into a state of utter confusion over what to do.
Should they increase the interest rate in line with the expectations of the financial markets and bankers, who rely on increases to maximise their profits from loans and debt, or should they cut interest rates on the grounds that it was finally working, to bring down inflation and in doing so hopefully avoid recession?
In the event, the Bank announced that they would do nothing while at the same time warning that they would not rule out further increases if inflation didn’t get down to their target of 2%.
The decision of the Monetary Policy Committee was described as ‘knife edged’ with the Bank’s governor Andrew Bailey forced to cast a deciding vote to secure a 5 to 4 to vote in favour of freezing interest rates.
Far from coming down, the slight decrease according to the CPI figures, due mainly to a drop in the price of hotel rooms and air travel, the RPI (Retail Price Index), which includes housing costs, rents and mortgages, was up from 9% to 9.1% in the same period, with food prices still shooting up by 13.6% a year.
The split on the MPC reflects the complete and utter confusion amongst these economists, who are allegedly in charge of ensuring economic stability but who clearly don’t have the slightest clue about how to keep the sinking ship afloat.
This chaos at the very heart of the Bank is a direct reflection of huge world crisis as all the contradictions of capitalism have reached the point of explosion, and whatever they do about interest rates will not solve this crisis.
All attempts to revive bankrupt capitalism following the world banking crash in 2008 by central banks printing trillions of worthless paper money to prop them up and stop major industries from going bust, have now come home to roost in the form of massive debt mountains engulfing every capitalist nation.
In the US the national debt reached over $33 trillion for the first time in history last Monday, with Republicans threatening to force a government shutdown if it’s not reduced by savage cuts to welfare and health.
In Britain, the debt stands at over £2.5 trillion, a debt the Tories, Labour and the Bank of England are all pledged to cut at the expense of the working class.
This is the only answer capitalism has to its historical crisis – to dump it squarely on the backs of workers through poverty level wages, cuts to benefits and social spending, all enforced by the whip of mass unemployment.
The powerful working class in Britain, the US and across the world are not prepared to sacrifice their lives to keep the bosses and bankers in profit while they are driven into the gutter.
World capitalism offers no future to workers and young people and it deserves to perish, by the working class going forward to take the power and establish a socialist society and a socialist planned economy. Only the victory of the socialist revolution can resolve the crisis of capitalism.