01 February 2024
If you are covering the latest interest rate hold from the Bank of England, and the news that one member of the MPC voted to cut rates, please find below a comment from Lindsay James, investment strategist at Quilter Investors:
“The Bank of England has continued its steady as she goes approach with interest rates by holding them again. Given economic growth is stagnating but not yet properly declining, and with confidence improving, the BoE will want to keep its powder dry before pivoting to rate cuts later in the year.
“Indeed, the latest inflation figures show that while it is falling, the journey back to 2% is not a smooth one, and thus they will not want to jump the gun and cut too early. Given the fragile nature of this economic environment, and the geopolitical risks playing out, Andrew Bailey and co will take a cautious approach rather than risk another inflation spike. What is likely to switch the conversation on rate cuts is if the 2% target is hit sooner than thought. However, we are beginning to see signs that the BoE may move soon as there was a vote at today’s meeting for a cut. There is a chance that it is reached in April, but with recent readings showing an unexpected jump, and some forecasts suggesting that attainment of the 2% level will be short-lived, the Committee is keen to mirror the Federal Reserve in promoting a ‘data dependent’ approach.
“It is likely though that rate cuts will need to be brought in sooner rather than later. The UK economy is in somewhat of a malaise, and rates at this level for too long may end up being overly constrictive. It remains to be seen if a recession can be dodged, and even despite the improving backdrop, failure for economic growth to materialise may just spark the BoE into action.”
