PwC comments on January 2024 MPC meeting

Commenting on the Bank of England’s decision to hold policy rates, Barret Kupelian, Chief Economist at PwC, said:

“The recent positive news on the headline inflation rate means that the Monetary Policy Committee is edging closer towards reducing its rate this year. But uncertainties remain, including what action the government will take in the Spring Budget with respect to fiscal policy and, also, whether developments in the Red Sea persist or even spread thus feeding into higher goods prices. 

“The Bank’s model inflation projections show that we’re on course to hit its target rate of 2% by the second quarter of this year. Most of this is driven by significantly lower energy prices. This is slightly later than our own projections which show that we could hit the target earlier, in April of this year.

“Finally, the Bank also did a stock take of the supply side in its more detailed Monetary Policy Report.  It concluded that the potential growth rate of economic activity or ‘the speed limit’ above which inflationary pressures build is below 1.5%. This points to the herculean challenge facing HM Treasury after the election - increasing the growth rate of the economy.”