KPMG has shared comments on the latest Bank of England monetary policy committee decision.
Yael Selfin, Chief Economist at KPMG UK said that the Bank of England strikes a “balanced tone with [the recent] cut to the bank rate.”
Selfin added that after a pause in September, the Monetary Policy Committee (MPC) felt compelled to “cut the bank rate by another 25 basis points.”
Selfin further noted that a cut had been widely expected, “as both pay growth and inflation continued to ease in recent data, with both measures significantly below the Bank’s projections at the time of the first cut in rates back in August.”
But they pointed out that the large fiscal loosening “announced in the UK Budget and some of the proposed policies from the incoming US administration could impact inflation levels next year.”
Selfin also mentioned that the MPC may now feel the need for “another pause in December and to limit the pace of cuts in 2025 as a way to lean against these potential inflationary pressures.”
Selfin also stated that the remarks accompanying the decision struck a balanced tone, “stressing the need to maintain price stability and respond to economic shocks.”
However, Selfin further stated that with the balance of inflation risks now skewed back to the upside, they “see the base rate settling at around 4% by the end of 2025.”
In another earlier update, Tim Sarson, Head of Tax Policy at KPMG UK, said that nation recently saw the delivery of one of the “most hotly” anticipated Budgets in living memory.
Sarson also shared that after 14 years in opposition and an election manifesto which pointed to “only relatively muted tax rises, it must have been a bittersweet moment for the Chancellor, as she had to navigate the tensions of delivering a pro-investment message while ‘fixing the foundations’ with tax rises.”
Sarson further noted that the positioning ahead of this budget was all about tough “political choices with a claimed black hole of £22bn and public services in need of vital support. In the final analysis tax rises totaling £40bn were announced, but there were few surprises.”
Sarson added that the Budget confirmed a “1.2% increase to employers national insurance alongside a reduction in the threshold at which it starts to be paid.”
As “heavily” trailed, the Chancellor confirmed “a Corporate Tax Roadmap which confirms the headline corporation tax will be capped at 25% whilst the main reliefs will be retained at their current levels.”
Sarson also stated that after months of speculation, businesses now have more clarity on what they “have to face into for the next 12 months, but hopes of a quiet Budget with no tax surprises were tempered by today’s increase to employer’s national insurance and to the National Minimum Wage.”
