Tory leadership LIVE: Truss vindicated as BoE announce major interest hike

Independent economist Julian Jessop said there would be “lots of warnings today from Team Rishi about the cost of higher interest rates as the Bank of England hikes”, but offered three counters that vindicate Liz Truss’s position. Mr Jessop pointed out that the tax cuts proposed by Ms Truss are “unlikely to have any significant impact on inflation” and could even help to reduce it. Secondly, he said it’s Team Rishi that is “playing at ‘fairytale economics’ if they think the current ultra-low level of interest rates is normal, healthy or sustainable”. Mr Jessop added that “most economists agree that fiscal policy is too tight – largely due to Rishi’s tax hikes – and monetary policy is too loose”. Thirdly, he said it is at least right to worry that rising short-term interest rates will add to the cost of public debt. But added that “this simply strengthens the case for the Government to lengthen the maturity of borrowing to lock in low rates – as Liz Truss has proposed!”

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