11 May 2023
If you are covering the Bank of England’s decision to raise interest rates, please find below a comment from Marcus Brookes, chief investment officer at Quilter Investors:
“With the Bank of England raising interest rates yet again, we continue to ask ourselves ‘is this the end of the hiking cycle?’ Unfortunately for many households and businesses, we simply just do not know yet. While it appears in the US that they are ready to hit the pause button on interest rates, here in the UK we continue to face sky-high inflation, leaving the BoE with a tricky task of knowing when enough is enough on rates.
“However, the rate of inflation is still predicted to drop considerably from here as energy prices have since subsided following Russia’s invasion of Ukraine. This may give the BoE enough cover at its next meeting to press pause and give a little respite, before deciding on the next course of action. So far the UK economy has held up in the face of adversity and the forecast of recession has not yet come to fruition and the BoE is now expecting one not to happen – although for many it will have felt like one. Growth forecasts are picking up, although remain very weak, and given this backdrop, it is perhaps premature to look too far ahead and expect cuts later in the year.
“The economic environment does not necessarily paint a picture of recovery yet, and as the last three years have shown, things can change very quickly. Inflation is proving incredibly stubborn and the Monetary Policy Committee won’t want a policy misstep, so for as long as the economy can handle it, higher rates will remain in place until price rises are under control.”
