Interest rate rise, Nov 2017 - PwC comments

Nov 02, 2017

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Andrew Sentance, senior economic adviser at PwC, comments on the latest Bank Rate out today: 

"The Monetary Policy Committee (MPC) is right to raise interest rates, even though economic growth has been relatively disappointing so far this year. Other economic data - in particular high Inflation driven by the weakness of the pound and the low level of unemployment - are much more supportive of a rise in interest rates.

"In addition, the MPC faces a long-term challenge of raising interest rates back to some sort of normal level after an exceptional and unprecedented decade of low rates since the financial crisis. 

"This month's MPC decision is an important signal to the public that the era of very low interest rates is coming to an end. Further interest rate increases should be slow and gradual, but this is the first step along that road."

Commenting on the impact of today's interest rate rise on consumer spending, Lisa Hooker, UK head of consumer markets at PwC, said:

"We don't expect the interest rate rise to have an immediate impact on consumer shopping habits, meaning Christmas retail sales should hold up. That said,  October retail sales are likely to be subdued as a result of the timing of half term and milder weather impacting high street footfall.

“Consumers will begin to feel the effects of the rate rise in 2018 and, when this happens, it is families who will generally be hit harder than the young or retired. 

"Our latest research found consumer sentiment is holding up, which is good news for retailers, especially those targeting younger shoppers, who are the only demographic group saying they plan to spend more this Christmas than they did in 2016. The young will also be less impacted by today's interest rate rise and growing grocery price inflation, which will disproportionately impact families and those with mortgages."

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