Left economists say low interest rates is right

From the Morning Star
Monday 10 May 2010
by Louise Nousratpour

Left-wing economists have welcomed the Bank of England's decision to hold interest rates at record lows as policymakers weigh up the impact of a eurozone bailout and a hung parliament.

The Bank's Monetary Policy Committee voted to hold rates at 0.5 per cent and left its £200 billion programme to boost the money supply unchanged.

The widely expected decision came as European leaders agreed to prop up the euro and prevent Greece's sovereign debt crisis from spreading - while talks over a possible coalition in Britain continued following last week's indecisive election.

Despite worries over inflation, the current political and economic uncertainty is expected to reinforce the MPC's "no change" stance as Britain makes a fragile recovery from recession.

Left Economics Advisory Panel co-ordinator Andrew Fisher said: "With personal insolvencies and bankruptcies at record levels, and home repossessions continuing, the Bank of England was right to keep interest rates low.

"Raising interest rates now would hit the poorest hardest."

Mr Fisher warned against raising interest rates to combat inflation, arguing that the government should instead suppress gas and electricity prices, which would benefit the poorest members of society.

"This would be best achieved taking the utilities into public ownership to directly regulate prices," he said.

Rate-setters have not changed policy since November - and are unlikely to until the scale of government public-spending cuts can be felt and the economy shows signs of stronger growth.

Mr Fisher argued that the Bank "should not be looking to economic growth figures, eurozone fears or inflation spikes when judging interest rates, but at personal debt and mortgage defaults."