KPMG UK has recently shared commentary on the latest Bank of England rate decision. As widely reported and anticipated, The Bank of England has decided it will keep rates on hold as it awaits the Budget, noted Yael Selfin, Chief Economist at KPMG UK.
Yael Selfin of KPMG UK. said that this time around, the Bank of England opted to keep interest rates unchanged in “a narrow 5-4 vote split, breaking its pattern of easing during forecast meetings.”
Selfin pointed out that the close vote and broad range of views on the MPC underscores the “uncertain backdrop policymakers are navigating ahead of the Budget.”
They added:
“The data flow over the past few months has been positive, with inflation coming in below the Bank’s expectations and the labour market continuing to loosen. However, this was not enough to sway a majority of MPC members to lower interest rates. Despite the recent favourable outturn data, the Bank’s medium term projections for inflation were broadly unchanged from the August meeting, suggesting risks to the outlook remain balanced.
They also mentioned:
“Despite today’s decision to keep interest rates unchanged, the narrow vote split and the more dovish tone in the minutes suggests the door remains open for a rate cut at the December meeting. Key data releases on inflation and the labour market, in addition to more clarity on fiscal policy following the Budget, will likely be enough to persuade a majority of MPC members to vote for a rate cut. We expect base rates to fall to 3.75% by the end of the year.”
For additional context, Governor Andrew Bailey explained the reasons behind our latest decision, including these key points:
- Today we held interest rates at 4%. Since August last year, we have been able to cut rates five times.
- Inflation has come down a long way from its peak three years ago, but it remains too high.
- In our decision to hold interest rates today, we have balanced the risk that above-target inflation becomes more persistent against the risk that demand in the economy is weakening, which might cause inflation to fall too low.
- If inflation stays on track, we expect to be able to gradually cut rates further.
