In advance of today’s (Thursday) meeting of the Monetary Policy Committee (MPC) the TUC is calling on the MPC to hold interest rates and make clear that there will be no early rise both to avoid choking off recovery and prevent a heavy blow to mortgage payers, who are already suffering from the living standards crisis.
TUC General Secretary Frances O’Grady said:
“Unemployment may have fallen, but the jobs market is still weaker than before the crash. The unemployment rate is 25 per cent higher than on the eve of the 2008 recession, and the number of people working part-time who want full-time work is double its pre-crash level. Low-paid, short hours self-employment accounts for a substantial proportion of new jobs, with self-employment up by close to 20 per cent since 2008.
“It would be wrong to raise interest rates when the economy is running below capacity. Only when all those wanting to work get jobs, and those wanting longer hours of work get them, should the Bank consider a rate rise.
“There are no signs that inflation will grow. Real wages have now been falling for over four years, and in recent months pay settlements have been falling. With inflation remaining below the Bank’s two per cent target, and regular pay going up by less than one per cent across the private sector, there is no need to bear down on inflation.
“While recent improvements in business investment have been welcome, bank lending to businesses remains depressed and business investment is still 16 per cent below its pre-crash peak. There’s still a long way to go before we return to pre-crash investment rates, let alone begin to make up the ground that has been lost.
“Raising interest rates now would choke off the recovery. While households are still trapped in the longest living standards squeeze for over a century, an increase in mortgage payments is the last thing they need. Rates cannot stay at such historic lows forever, but they should not increase until the recovery is sustained and workers start to see the proceeds in their pay packets.”