Professor Joe Nellis, Professor of Global Economy at Cranfield School of Management and economic adviser at professional services firm MHA, gives his verdict on yesterday’s announcement on interest rates by the Bank of England’s Monetary Policy Committee.
“THE DECISION to hold rates today should come as no surprise as the appetite for an interest rate cut from the MPC has shifted in recent weeks. There is no silver bullet to taming inflation and the Bank of England will not want to be seen to be jumping the gun to cut rates.
“While headline inflation has fallen sharply from a peak of 11.1% in October 2022 to 3.2% in March there is still some way to go to bring it down to the official 2% target and to keep it there.
“The path to low and sustained inflation is being frustrated by several factors including strong wage growth, oil price hikes and global tensions, all of which are negatively impacting efforts to squeeze inflationary pressures out of the economy.
“Nor is the mood music from the Fed in Washington and the ECB in Frankfurt helping.
“With oil prices on the rise again, there are fears that inflation could even increase for a few months, delaying an interest rate cut until August 1 at the earliest.
“There are some choppy waters ahead but we still expect two cuts in interest rates by the year end, taking the base rate down to 4.75%.
“Anyone hoping for a return to the ultra-low interest rates of the past decade any time soon will face disappointment however as borrowers continue to lose out to savers.”
Professor Nellis is Professor of Global Economy at Cranfield School of Management and economic adviser at professional services firm MHA.
