14 December 2023
If you are covering the Bank of England’s decision to hold interest rates, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“Following in the Fed’s footsteps, the Bank of England’s monetary policy committee has held interest rates once more at its final meeting of the year. Unlike it’s US counterpart, however, it stopped short of committing to a switch in stance towards rate cuts just yet, noting that “monetary policy is likely to need to be restrictive for an extended period of time”.
“Investors have been pricing in several reductions throughout next year, but the Bank has today doubled down on its ‘higher for longer’ narrative. The Bank faces a considerably more difficult economic outlook than the Fed, with inflation still more than double its 2% target and GDP missing estimates and contracting 0.3% month-over-month in October, heightening the risk of a recession. Two years on from its first rate hike of this cycle, however, it is clear the Bank’s efforts are starting to take real effect and calls for cuts will only grow stronger should the economy continue to weaken.
“Ultimately it is good news for consumers that peak interest rates have more than likely now been reached, although notably 3 voting members of the 9-strong committee voted for a 25 bp hike. While we are already witnessing just how much markets can rally at the prospect of US rate cuts, it seems that in the UK more patience will be required.”
