The former chief economist of Lloyds Bank has said that current economic conditions fully justify a cut to interest rates today.

Trevor Williams, who chairs the IEA’s Shadow Monetary Policy Committe, says that the current rate of growth in the UK economy offers no inflationary threat.

Mr Williams said: “The latest data suggests that the economy likely avoided recession in the last quarter of 2023, but only just. At best, the UK economy grew by around half a per cent in 2023. This pace of growth offers no threat to inflation.

“UK consumer price inflation has fallen from a peak of over 11 per cent to four per cent at the end of last year. Falling energy prices, weak economic growth, the contraction in money supply, and higher interest rates are succeeding in rapidly lowering price inflation.

“Forward indicators suggest a risk of a significant undershoot of the two per cent inflation target. The current inflation rate is well below what the official November forecasts suggested it would be at this point.

“Moreover, inflation will drop to two per cent or below a year ahead of projections. In that scenario, an immediate cut in interest rates is necessary and fully justified by the data.”