Susannah Streeter, Chief Investment Strategist, Wealth Club, has shared her insights on the latest Bank of England (BoE) announcement, as the BoE’s Monetary Policy Committee vote 7-2 to keep interest rates on hold at 3.75%.
“Policymakers are playing a game of patience, slowly shuffling their latest cards of data and taking time to deliberate where inflation will land next. With a peace deal being signed to end the Iran conflict, energy prices moving sharply lower, and the latest stable snapshot of price increases, there’s clearly no urgency for sharp monetary policy moves.
“The majority voted to keep interest rates on hold, while they wait for the next rounds of economic indicators. However, there is dissent around the table with two policymakers voting for a rate hike, clearly worried that inflationary pressures are building.
“While higher energy prices are still set to sweep further into prices across the economy, given the lag effect the supply crunch has, they are being offset by stagnant business activity and a highly cautious attitude towards investment and spending. The latest data on the labour market, showing that vacancies have fallen to a five-year low, is another piece of the jigsaw, indicating a weakening labour market and a struggling economy. Employers are more hesitant about taking on new staff as they try and cope with an uncertain economic outlook and deal with higher wage costs.
“Another interest rate hike is still being pencilled in on financial markets, but forecasts of multiple rate hikes have been reined back. Policymakers are staying cautious, anxious not to tip the economy into reverse but remaining wary about keeping a lid on unruly inflation.”
