Former BoE economist urges bold fiscal policies and cautious interest rate changes

Former BoE economist urges bold fiscal policies and cautious interest rate changes

Andy Haldane, the former chief economist at the Bank of England, and now adviser to both the Conservative and Labour parties, has criticised the UK’s political leadership for their lack of fiscal ambition, while also urging the bank to pause interest rate increases.

Speaking to The New Statesman, Mr Haldane stated that both main political parties lack the courage to increase spending, despite it being an ideal time for governments to borrow due to historically low interest rates. He stressed the necessity for significant public investment to confront the various crises the UK is facing, including economic, social, and environmental ones.

In his advisory roles, Mr Haldane contributed to both parties’ regional growth strategies, yet he criticised the slow progress made in addressing regional disparities. According to him, it will take “a generation or more to redress” such imbalances.

The former chief economist also emphasised the urgent need for the UK to improve its industrial and regional policies. He used the US Inflation Reduction Act, which promotes investment in renewable energy technologies, as a benchmark for comparison, highlighting the UK’s lagging position in the global race for reindustrialisation.

Mr Haldane, who previously served on the Monetary Policy Committee at the Bank of England, also called for a pause in interest rate hikes, which have now reached 4.5%, the highest level since 2008.

This is in order to prevent the UK from sliding into recession and to safeguard jobs. He also claimed that the UK could afford to take more time to reduce inflation, currently at 10.1%, back down to the target rate.

However, Mr Haldane did voice confidence that inflation rates would begin to drop rapidly, starting in the following month, due to a significant decrease in energy prices. Yet, he cautioned that reducing inflation to the bank’s 2% target would be a more challenging task.

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