John Lewis boss Dame Sharon White warns hiking interest rates again would be a 'mistake'

'The Bank absolutely has a dilemma': Dame Sharon White sat down with ITV News' Business and Economics Editor Joel Hills

The Chair of the John Lewis Partnership has called on the Bank of England to stop increasing the cost of borrowing.

Dame Sharon White believes the Bank has done enough to tame inflation and that we have reached the point where hiking interest rates carries greater risk than pausing.

The Monetary Policy Committee (MPC) has voted to increase Bank Rate fourteen times since December 2021.

It stands at 5.25% and investors are betting that the Bank is likely to raise it to 5.5% next Thursday.

“I think (another rate increase) would be a mistake," Dame Sharon told ITV News.

"The Bank needs to hold its nerve, to hold tight. I think the risk is always you’re either 'too little, too late' on interest rates or you're 'too much too late' on interest rates.

"And I think the real risk at the moment is that having been too little, too late, we're now too much, too late."

Last week, the Governor of The Bank of England, Andrew Bailey, told MPs he thinks rates may soon be peaking.

But earlier this week his colleague on the MPC, Catherine Mann, said she thought there was further to go. 

Some at the Bank clearly want to see harder evidence that inflation is coming back under control but Sharon White has seen enough.

"The Bank absolutely has a dilemma but I think what you've seen this year is inflation has started to come down aggressively and core inflation, which is the measure that really matters, has started to come down."

She added: “I think there is a much more material risk, for families, for people, for businesses like our own up and down the country, that we inadvertently tip into a recession.

"And for me, that would be a risk that I don't want to see."

Dame Sharon was speaking on the day that the John Lewis Partnership announced a loss for the first six months of this year of £57.3 million.

She explained that high inflation had swept through the through the business “like a hurricane” - driving up costs at at time she has been trying to cut them and leaving customers feeling poorer.

Dame White said that higher interest rates were now having “an appreciable impact” on customers with mortgages who were being “more cautious,” particularly when it came to the purchase of so-called “big-ticket” items like sofas.

The Partnership’s results show signs of a strengthening pulse at Waitrose but sales at John Lewis’s department stores were down on last year and the business lost customers.

Dame Sharon, who chairs the partnership, says the shock of high inflation means it could be 2028 before the partnership is making really healthy profits again - two years longer than had been hoped.

Of course, all retailers face the same challenging environment at the moment.

Some, like Marks and Spencer, have managed to remain profitable but Wilko went bust recently and today Lidl reported a hefty full year loss (£76 million) which it blamed on its rapid expansion.

In a cost of living crisis, even discounters can come unstuck.

But high inflation and rising interest rates are not John Lewis’s only problems.

The half-year loss of £57 million would have been almost £12 million lower had there not been a sharp increase in shop-lifting.

"These are organised gangs who are shoplifting to order," Dame Sharon explained.

"(They are targeting) a range of things. It might be, you know, high value champagne, it might be steaks in Waitrose.

"I was in a (John Lewis) store in Scotland and there was a raid on some of our tech products."

Dame Sharon said the partnership would work with other retailers to tackle the issue, as well as the police who she said had been “under-resourced”.

On Thursday, the European Central Bank (ECB) raised interest rates to 4%, an all-time high, for the 19 countries which use the Euro. It also signalled that rates may have peaked. 

Economists think the major central banks are preparing to pause for breath, as inflation is falling and growth has dropped under the weight of higher borrowing costs.

John Lewis desperately needs a good Christmas this year.

It will be hoping that next Thursday, the Bank decides to stop sitting on its hands.

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