PwC comments on March 2024 MPC meeting

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

“The Bank of England is inching closer towards a rate cut, but is not there yet. Today’s 8-1 vote to keep rates on hold shows that the Monetary Policy Committee members want to see more concrete evidence that inflation pressures are moderating on three fronts: the tightness in the labour market, wage growth and services price inflation.

“There is significant evidence from surveys, economic data as well as my own conversations with business that the labour market is cooling. But what is unique in the current economic cycle is the uncharacteristically high levels of relative economic inactivity and skills mismatches. 

“Both of these factors distort the adjustment required on the supply side of the labour market, making the normalisation of wage growth rates more choppy and uncertain. As a result, the Bank is in wait-and-see mode. 

“On the positive side, the Bank expects some gradual pickup in economic activity starting from the first quarter of this year, similar to our own main scenario projections. Headline inflation dropping below the 2% mark in April will also help. Bar any surprises, economic growth should pick up momentum in the second quarter of this year.”