PwC comments on the Bank of England interest rate decision

Jan 30, 2020

John Hawksworth, chief economist at PwC, comments on today's interest rate decision:

"The Bank of England MPC voted 7-2 for the third meeting running to keep interest rates on hold, contrary to market expectations that more members could opt for a rate cut this time. 

But the Bank also revised down its UK growth projections and made clear that interest rates might still need to be cut if the projected gradual recovery in the UK economy fails to materialise over the next few months.

On balance, this seems like a sensible decision by the MPC as more data is needed to see if the economy has indeed enjoyed a sustainable 'Boris bounce' since the election. Most recent business and consumer surveys do show a pick-up in confidence and the housing market also seems to have perked up in January, but we don't yet have any official data confirming an upturn in actual consumer spending or business investment. There are also many global uncertainties to consider, including the extent of the further spread and economic impact of the new coronavirus.

So it makes sense for the MPC to continue with a 'wait and see' stance for the moment. If the UK economy fails to lift off in the first quarter, whether for domestic reasons or due to further adverse global shocks, then a rate cut could be on the cards in the spring. 

But if we do get clear signs of stronger business and consumer spending growth, backed by planned rises in public spending from April, then interest rates could safely be left on hold this year and attention might turn back to the prospect of gradual rate rises in the medium term."

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