Bank of England presses pause to assess flickering growth and inflation
The Bank has voted by 5 to 4 to keep rates on hold at 3.75%.
The recent snapshot of the UK economy indicates a growth spurt in January, while inflation is staying stubborn.
More cuts are expected this year, given labour market weakness, but the timing is slipping back.
Given the voting split – a cut in March is still very much on the table.
Susannah Streeter, Chief Investment Strategist, Wealth Club, said, “The Bank of England has pushed a big red pause button on interest rate cuts as caution remains the name of the game and policymakers assess flickering growth and stubborn inflation.
Although the signs are that the price spiral will be dampened down in the coming months, they’ve judged that it’s still too early to move, especially given signs that growth in the economy is showing tentative signs of making a comeback. The latest PMI snapshot showed activity accelerating with Budget blues being cast aside.
Plus, with headline inflation ramping up at the last count, and wage growth still uncomfortable, it’s not a clement environment for interest rate cuts.
Still, it was a closer call than expected, and it puts a cut in March still very much in the picture. The labour market is showing weakness, Budget changes are set to bring down energy and transport costs and a wave of cheaper Chinese goods are heading this way. So, more policymakers could well be swayed to vote for lower borrowing costs next month.
But these are volatile times, with the overall outlook in a state of flux, given ongoing geopolitical tensions, erratic US trade policy, and a tech sell off roiling markets. So, the Bank’s decision makers will still want more clarity on what could be ahead, before tinkering with borrowing costs again.
