PwC comments on December 2024 MPC meeting

Commenting on the Bank of England MPC meeting today, Barret Kupelian, Chief Economist at PwC, said: 

“The Monetary Policy Committee maintained rates at 4.75%. Though the decision was unsurprising, the summary of the MPC’s decision provides an insight into the Committee’s thinking illustrating the good, the bad and the ugly of the recent short-term dynamic of the UK outlook.” 

The good: “With businesses under significant cost pressure from recent policy changes, wage growth is expected to moderate to the 3%- 4% mark. Although sector specific patterns might differ, this is significantly below expectations of 5.5% in the beginning of the year. So this could be a source of respite for businesses trying to control costs and maintain profit margins.”

The bad: “The employment gap relative to the pandemic is likely to be less than what the initial figures had suggested. While this is in principle positive news, it also suggests that labour productivity figures are probably lower than what was initially recorded- this will be a key area of focus for businesses and governments in 2025.” 

The ugly: “The Committee now expects that UK growth was flat in the fourth quarter of the year. This is problematic, particularly in view of the fact that our largest trading partner, the Eurozone, is slowing down, and there are likely to be more trade frictions on an international level.”

“Entering 2025 it is a mixed view on the UK economic outlook. If the growth outlook disappoints, then the Bank of England could be emboldened to go down the same road as the European Central Bank and cut its headline policy rates faster.”