KPMG comments on today’s interest rate news - February 2023

“Split policy decision signals that interest rates could soon peak” says Yael Selfin, Chief Economist at KPMG UK.

“The split vote indicates some MPC members are becoming more wary of inflation undershooting its target in the medium term, with the cumulative impact of monetary tightening yet to have a full effect on the economy.

“The Bank’s latest projections see a shallower recession, envisaging a 0.8% peak-to-trough fall in GDP, while our forecast is of a fall of 1.4%. Nonetheless, this still paints a gloomier picture for the UK economy, which is suffering stronger headwinds compared to its peers.

“Despite the new forecast being conditioned on a lower expected path for interest rates, inflation at the policy-relevant horizon of three years is still significantly undershooting the 2% target. Combined with falling energy prices and a softening in labour market conditions, we expect a further interest rate increase at the next meeting before the Committee adopts a more dovish consensus.”

-ENDS-  

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