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If the European Central Bank thinks it’s safe to cut interest rates it’s high time for the Bank of England to follow suit. The ECB is overwhelmingly likely to start the first of a series of reductions at its meeting today, cutting its main refinancing rate by 0.25 percentage points to 4.25 per cent.

But here, unless something really dramatic happens in the next few days, the Bank’s Monetary Policy Committee (MPC) is widely expected to hold the Bank rate at 5.25 per cent when it meets in two weeks’ time. If it does so, it will be making a serious mistake.

Here’s why. For a start, UK inflation is now lower than in the Eurozone. The latest Consumer Prices Index there was 2.6 per cent in May, up from 2.4 per cent in April. Here, our April number was 2.3 per cent, and the May figure to be published on 19 June – the day before the MPC decision – is widely expected to be lower still, either 2.1 per cent or even 2 per cent.

Later this autumn the headline inflation rate may climb a bit, for the underlying forces of inflation, especially wage growth, remain strong. But inflationary pressures more generally are weakening. For example, inflation in the all-important services industries is coming down, and according to the most recent purchasing managers’ indices, is set to fall further.

There is another key factor. Changes in interest rates take a long time to have their full effect on inflation: the general rule is that the lags are a year to 18 months, maybe even longer. So what the central banks do now will be felt in the inflation numbers of the second half of 2025. But they have a much earlier impact on business sentiment, and on........

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