2) The Bank of England cutting rates in November would lead to: more jobs for workers, lower interest payments for borrowers, more business investment (especially in the green transition), and less pressure on the government’s spending plans.

What does this all mean? 1) Prices are now rising at a low and acceptable level on average – this is great news for the millions of people still struggling from the cost of living crisis.

If you combine this with the recent data suggesting that the jobs market is suffering under the BoE’s high interest rates (i.e. the intended goal – hooray?) there is a convincing data-driven case for the Bank of England to lower interest rates when the Monetary Policy Committee meet in November.

The Apr-Sep metric is much more relevant than the 12-month figure for understanding: a) how quickly prices are actually rising at the moment [answer: in line with 2% target] , and b) how the 12-month CPI rate is likely to move going forwards [answer: on track for seeing a major drop in April 2026].

A lot of this difference is driven by the large bump in regulated prices (e.g. water and energy bills) in April this year. Once you set those aside by focusing only on April-September, CPI on the whole is actually increasing at around 1.9% per year i.e. in line with the BoE’s 2% target.

If the BoE is serious about fulfilling its legal mandates to ensure financial stability and support government economic policy, it now has little excuse not to follow the ECB’s example and implement similar measures!

Meanwhile, @bankofengland.bsky.social has so far refused to implement similar measures on corporate bonds in its own collateral framework. In fact, heavy-emitting companies are effectively being subsidised by the BoE’s “carbon-bias”.

3) It will demonstrate to investors that EU regulators will align themselves with EU and international climate law. This message will affect the decisions of many financial actors far beyond those who are immediately impacted.

1) It will reduce its own losses in the event that these bonds suddenly lose value.

2) It will make it less attractive for financial institutions to buy these bonds in the first place, which in turn will make it more expensive for dirty companies to borrow money.

An example of this are fossil fuel companies like Shell and BP who are still expanding their fossil fuel operations in contradiction to the Paris agreement.

By saying it will loan less money in exchange for bonds issued by such companies, the ECB will achieve three things:

In referring to “climate-related transition risks”, the ECB is talking about the risks faced by companies who are not aligning themselves with the green transition, who could suddenly see a big drop in value when future climate legislation or behavioural shifts come into effect.

This is a huge step in reducing the risks that climate change poses to the financial system, that we have been calling for since 2021!

neweconomics.org/2021/03/gree...

I described exactly what I wanted to depict, and chatgpt produced the image. But am thinking a lot about whether, in general, it would be a more ethical practice to commission a human illustrator. Keen to hear thoughts!

So this time round, I’m holding back on praising the ECB until we see some concrete policy measures, particularly removing disproportionate fossil fuel support from the collateral framework and introducing green refinancing operations. More detail in the blog!

But though the ECB announced an ambitious climate roadmap back in 2021, since then it has had a chequered track record on how monetary policy decisions have affected the green transition.

Even better, the new language also includes reference to nature degradation – which poses huge financial and economic concerns, as much research has shown.

It was good to see that, in its updated strategy statement last week, the ECB stuck with scientific consensus and kept its strong language about climate change.