“On balance, holding rates a wise move for the UK economy” says Yael Selfin, Chief Economist at KPMG UK.
“With recent months characterised with unusual volatility, it is hard to read the full strength of the economy, and wise for the Bank of England to hold before making a change in rates. Moreover, the continued uncertainty until a trade agreement with the EU is agreed means businesses are likely to remain reluctant to invest. A cut in rates now may therefore not stimulate the economy much, while leave the MPC with even less fire power for later when it could be more effective.
“While inflation is currently well below target, at 1.3% in December, this is due to temporary factors and does not reflect the extent of price pressures in the UK. Spare capacity according to the Bank’s own assessment remains relatively low, with the weak investment climate and Brexit distractions taking their toll on productivity.
“As we enter a new era of fiscal largesse, with significant public spending increases expected to be announced in the March Budget and later on this year, the MPC will be right to worry about rising inflationary pressures to come. But savers will need to wait for a long time before the committee considers rate rises again.”
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About KPMG in the UK
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