21 March 2024
If you are covering the latest interest rate hold from the Bank of England, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“As had been expected, the Bank of England has once again followed in the Federal Reserve’s footsteps with a further hold on interest rates. Eight of the Bank’s nine policymakers voted to hold, while one voted for a cut, suggesting the tide could soon begin to turn.
“Just yesterday we saw inflation drop to 3.4%, the lowest level seen since September 2021, but the journey to get there has not been plain sailing and there is still some way to go to reach the Bank’s 2% target. Wage growth continues to be a significant driver of inflation, particularly in the service sector, and though this is now slowing a little it will no doubt make this target harder to achieve. There are also signs that the UK has already pulled itself out of the recession it entered at the end of last year with a return to a modest level of growth. As such, the Bank has reiterated that it will maintain its data dependent resolve until it is satisfied that inflation has come down far enough and will not see a further spike.
“Nonetheless, yesterday’s figures will have given the Bank of England some confidence that inflation is finally coming to heel, and with the 12% cut to the energy price cap due to kick in in April it will face increasing pressure to finally begin making cuts. The Bank has a difficult balancing act ahead of it as though it will be reluctant to move too much too quickly, it also risks being overly constrictive if it holds rates at this level for too long, so we are likely to see the first cut being made sooner rather than later.”
