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KPMG comments on today’s interest rates decision

KPMG comments on today’s interest rates decision


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Yael Selfin, Chief Economist at KPMG in the UK, comments on today’s MPC decision:


“The MPC decision to raise interest rates by 0.25 percentage points was widely anticipated, allowing businesses and households to prepare in advance. The impact of today’s rise is likely to be limited given that UK rates remain just marginally above their historic lows, although some of the more vulnerable households may be more significantly affected, especially since the rise in rates follows a period of higher inflation and modest wage growth, squeezing households’ real earnings.    


“It was right for the MPC to act given the tightness of the UK labour market, and the potential distortions to assets’ fair value lurking around thanks to the unprecedented liquidity injected into the system over the past decade. With interest rates being the MPC’s main policy instrument, it is also important to create room for manoeuvre which the MPC can use later on. As Brexit is looming, and the possibility of an unintended disorderly exit increasing, it is helpful for the MPC to have more ammunition at hand to counter any short term negative impacts on the economy.   


“The current fragile economic environment and half-hearted performance of average earning growth call for a cautious path of future interest rates. We therefore expect the MPC to keep interest rates unchanged for the rest of this year, raising rates again only in the second half of next year, once the UK has left the EU and there is a bit more clarity about the UK-EU relationship post the transition period.”


Commenting on the decision and the impact on consumers and retailers, Paul Martin, UK head of retail at KPMG, said:


“Whilst large parts of the retail sector have recently benefitted from a welcome summer boost, consumer confidence still remains volatile, if not subdued overall. Once the warm weather and holiday season pass, it is very likely that we will experience a further slowdown of retail performance, as the impact of the latest base rate rise starts to filter down into consumer spend in the autumn.


“Although this base rate rise will give would-be savers more of an incentive to actually save, this will also detract day-to-day retail spend. Consumer credit is now set to become pricier, whilst other outlays like mortgages will also have a knock-on effect on what shoppers have left to spend.”


Commenting on what it means for banks, Steven Hall, Banking Partner, KPMG says:


“Today’s rate increase will cause no real shocks however, in the longer term, should the rates continue to rise and with less notice, many risk managers will need to beconscious of their teams’ experience. Banks now have relatively senior professionals who built their careers during a decade long, low rate environment. Firms will want to keep a keen eye on employees providing critical functions such as analysts, forecasters and credit collections teams who have never experienced volatile rates.


“Turning to consumers, whilst progress has been made to manage levels of consumer credit, banks are bracing themselves to start dealing with a rising number of vulnerable customers. Consumers have become dependent on freely available cheap credit and as interest rates rise so will defaults.  Supporting both banks’ balance sheets and vulnerable consumers through that process will be new to many workers and challenging for everyone.”






For media enquiries, please contact:


Riku Heikkila, CNC Communications


Tel:  020 3219 8812




KPMG Press Office

Tel:  +44 (0) 207 694 8773

Follow us on twitter: @kpmguk


Notes to Editors:


About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 14,500 partners and staff.  The UK firm recorded a revenue of £2.2 billion in the year ended 30 September 2017. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 154 countries and territories and has 200,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity.  Each KPMG firm is a legally distinct and separate entity and describes itself as such.

© 2020 KPMG LLP, a UK limited liability partnership, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative, a Swiss entity. All rights reserved.

KPMG International Cooperative (“KPMG International”) is a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.

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