19 September 2024
If you are covering the Bank of England’s decision to hold interest rates at 5%, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“Despite the supersized rate cut in the US yesterday and cuts continuing to be enacted in Europe, the Bank of England has decided to hold rates following its first cut in four years last month. However, while today may be a pause, the general consensus is to expect more rate cuts this year and into next as the economic momentum that had built up slows and inflation remains close to target. Two more cuts are expected by financial markets, and with time running out in 2024, the next meeting is likely to see the BoE’s next cut delivered.
“The spectre hanging over all of this, however, is the upcoming Autumn Budget at the end of October. Taxes are guaranteed to rise, but by what extent we are not sure and thus the economic impact cannot be properly gauged. Businesses and consumers are likely to cut back on spending in anticipation of changes to their income and as such growth could slide further. Given Labour’s emphasis on wealth creation and economic growth in the run up to the election, it may in turn, have to rely on the Bank of England to deliver this in the short term by providing more regular or larger rate cuts than perhaps would have been expected otherwise.
“A rate cut would have been especially welcomed by consumers and businesses alike, given the economy remains close to stall speed. Having had a positive and rather buoyant first half of 2024, dark clouds are gathering once again and as such action from the BoE will be required sooner rather than later.”
