23 March 2023
If you are covering the Bank of England’s decision to raise interest rates, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“After Tuesday’s inflation figure, the Bank of England had no choice really but to raise interest rates today. It will have been somewhat spooked by inflation rising, and it makes the prediction that inflation will stand at just 2.9% by the end of the year even more difficult to achieve. However, the contagion in the banking system appears to have been contained for now, giving it some cover to raise rates today without being overly concerned it will tip the balance for any banks that are under duress. Furthermore, the UK banking system has much more stringent regulation and capital adequacy rules so the system should be able to handle this rate rise.
“Going forward, it will be hoped this will be the final rate hike before a period of pause to assess how the rate hikes are taking effect. Prior to the surprise inflation stat, there was growing divergence in the Monetary Policy Committee about the most appropriate way forward with rates, particularly given the economy is expected to contract this year though miss falling into recession. Ultimately, inflation continues to be the key driver of interest rates and this will continue to be the case unless the recent banking issues transforms into a full-blown crisis. Inflation is proving sticky so it is hard to say if this is the end, but consumers up and down the country will be hoping for some relief when the Bank of England sets rates again in May.”
