Sunday, June 16, 2024

Bank of England brings an end to run of interest rate hikes

Following a run of 14 increases, the Bank of England has chosen not to hike interest rates today (21 September).

It sees the current base rate remain at 5.25%, and comes after a surprise slowdown in inflation figures. This is thought to have eased pressure for another rise in rates.

The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5–4 to maintain the Bank Rate.

Anna Leach, CBI deputy chief economist, said: “The Bank of England said they’d be data-driven: a sharper-than-expected fall in services inflation driving a small fall in the headline inflation rate has proved enough for the Monetary Policy Committee to hit pause on rate rises after 14 consecutive increases. Despite the pause and a slowing of inflation, many businesses and households will be still feeling the impact of tighter credit and higher prices.

“The coming months will be tricky for the Bank. They’ll be vigilant regarding developments in wages and inflation expectations, given private sector wage growth is still topping 8%. Meanwhile, the outlook for energy prices has shifted, with oil prices now pushing up and European gas prices once again at the mercy of the winter weather outlook. This could slow the pace of decline in the headline inflation rate and risks underpinning still-high core inflation. But the economy is showing signs of turning too: the unemployment rate has risen, vacancies are down and activity is slowing.

“The MPC’s next meeting date in November coincides with the publication of the Bank’s updated forecast and their full assessment of economic conditions. And before that we’ll see the full set of revisions to GDP from the ONS, as well as more data on economic conditions, before heading into the Autumn Statement later in the month. With business investment crucial to delivering growth, this presents an ideal opportunity for the Chancellor to shore up business confidence.”

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