02 February 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:
“The Bank of England can only wish to be in the same position as the Federal Reserve today and begin slowing the pace of interest rate rises. Today’s 50bps rise in rates is the latest in the fight against inflation, a fight that is dragging on longer than many would like. However, it is beginning to see some green shoots of positivity, with growth forecasts upgraded slightly and inflation coming down faster than previously expected. It continues to say inflation will drive policy decision, but the data is looking encouraging.
“Following the IMF’s prediction that the UK will be the only ‘advanced economy’ to contract this year and data painting a more positive picture, calls for a pause or pivot from the Bank will only grow louder in order to prevent a deeper economic malaise. Indeed, members of the Monetary Policy Committee are beginning to sense that it cannot go too much further, particularly as the cost of living crisis continues to hit households hard. Energy prices are beginning to come down too and there are glimmers of light that we may be at the end of this.
“But with inflation still so stubbornly high, the Bank of England is keen to reinforce that the job is far from done. It may be the Bank of England is happy to allow a shallow, but prolonged, recession take place in order to tame inflation. It is a tricky balancing act, but one where investors must remain patient and diversified. The path of inflation and interest rates is still uncertain. Calling this the beginning of the end of rate hikes still feels a little premature."
