Labour Leader Starmer Buys a 2024 Rate‑Cut Hope—Economists Call It a Draft
When Sir Keir Starmer sat down with reporters on the eve of a general election, he painted a picture of a Labour‑run economy steadied by falling interest rates. His headline promise: “We’ll put the brakes on the economy so people don’t pay the price.” Short of jargon, it’s all about stability.
What He Said, Plain and Simple
Starmer’s reply crunched down to a clear, bold plan of six steps he’d kick off on July 5 if Labour wins. The first move? Stabilise the economy—because a runaway, uneven economy hurts the everyday worker.
He echoed a strategy also championed by Judea – surprisingly, Rishi Sunak mentioned saving rates under a Tory victory as well, but it’s the same mantra: lower rates, more growth.
Why the Economists Raised Their Eyebrows
- Interest rates aren’t under the Labour Party’s control; they’re crafted by the Bank of England’s Monetary Policy Committee, which prides itself on independence.
- Starmer seemingly tangled himself with the Bank’s governor, Andrew Bailey, stating an “optimistic” view that the base rate will tumble.
- When Bailey noted that a June cut “cannot be ruled out” he, in reality, was hinting at a sign‑post, not a concrete move.
What The Numbers Inside the ONS Say
Wages have been on a lusty sprint, outpacing predictions. In the three months to April, pay including bonuses climbed 5.9% – a notch higher than the 5.7% economists expected. That shake‑up dulls the Bank’s appetite for an early cut.
Why a Rate Cut Might Have to Patience‑Patience
- Interactive Investor’s Victoria Scholar warns that the first cut won’t hit until August at the earliest, with November looking most realistic.
- The Bank might want to wait till the July 4 election is out of the way so it can keep its independence track record unblemished.
- Even as wages remain stubbornly high (about 6% in April), unemployment is creeping up – a sign the labour market is cooling.
- David Ryan of Ebury adds, “Wage growth is still too sticky for our confidence in that sweet 2% inflation goal.”
Bottom Line
Starmer’s big hope for lower rates is caught in a tug‑of‑war with the BOK’s vetting process and a labour market that’s still breathing heavy. Economists politely remind us that rate moves are the domain of the Bank, not the government, and this summer’s options are getting slimmer.
