AS WIDELY predicted, the Bank of England Monetary Policy Committee (MPC) yesterday voted to hold the UK key base interest rate at 5.25% while at the same time warning that there should be no expectation of this rate being cut in the future.
Governor of the Bank of England, Andrew Bailey, insisted against all the evidence that higher interest rates ‘are working’ to curb inflation while adding the ominous caveat: ‘We’ve held rates unchanged this month, but we’ll be watching closely to see if further rate increases are needed. It’s much too early to be thinking about rate cuts.’
Bailey dare not admit it publicly but high interest rates are here to stay was the message from the Bank as inflation continues to devastate the economy despite all the attempts to rein it in through continuous increases in the interest rate from its record low of 0.1% in December 2021.
Driving down inflation by making everything from food, energy, mortgages and rent more expensive because of the interest rate increases has completely failed.
This deliberate policy of forcing workers and young people to spend less by driving up the cost of living has not achieved the Bank’s ‘holy grail’ of achieving a 2% rate of inflation.
Instead the official rate of inflation has stuck at 6.7% in September, with no signs of coming down while the prices for essentials like food, energy and rent are far above even this rate.
Despite a slight decrease in certain items like cheese and eggs, the rate of inflation for food overall was nearly twice that of the official rate at 12.1%
While failing to curb inflation, these increases have pushed the weak British capitalist economy right over the brink into recession. Results of a survey conducted by the global financial company S&P revealed that UK manufacturing is in its worst downturn since the 2008 global banking crash.
Manufacturing output contracted and unemployment has increased as the effects of the 14 previous consecutive increases in interest rates have filtered through the economy.
Rob Dobson, a director at S&P Global Market Intelligence, said: ‘The factory sector remains a weight dragging on an economy already skirting with recession.’ It is not just skirting but diving headlong.
Thousands of workers in the steel industry face dismissal, along with the hundreds of thousands of jobs being cut as manufacturing and factories close down or cut back under the impact of costs spiralling out of control. It is the working class and young people who are to bear the massive costs of this doomed attempt to rescue the UK economy from collapse, as jobs are slashed, wages held down and the cost of living spins out of control.
While workers and youth see their lives and future smashed up, the main beneficiaries of continuous high interest rates are the banks which pocket all the increases in interest on loans and mortgages.
Before the MPC revealed its decision, the general secretary of the Unite union, Sharon Graham, issued a call for a rate cut saying:
‘The Bank of England has been squeezing the living standards of workers while the banks make billions from two years of rising interest rates – this has to stop. High inflation has not been driven by workers it’s been driven by the greed of the profiteers.’
She added: ‘The big four are just picking the pockets of workers to give handouts to shareholders. It’s high time the Bank of England took action against the real culprits of this cost-of-living crisis.’
In fact it’s high time that Graham and the TUC leaders stopped just making useless appeals to the Bank or the Tories and started fighting.
The powerful working class has shown it is not prepared to sacrifice its lives and the future of its children by being driven into poverty and destitution to save a bankrupt capitalist system and the profits of the bankers and bosses.
The central demand must be for mass action to force the TUC to call a general strike to bring down the Tories and bring in a workers government that will expropriate the bosses and bankers, replacing capitalism with a socialist planned economy – this is the way forward.
Join the WRP and Young Socialists today, to rapidly build up the revolutionary leadership that is required required to organise the victory of the British and world socialist revolutions.