KPMG comments on today’s interest rate decision - Aug 2023
“The MPC decision paves the way for a potential policy exit” says Yael Selfin, Chief Economist at KPMG UK.
“The MPC decision paves the way for a potential policy exit” says Yael Selfin
“The MPC decision paves the way for a potential policy exit” says Yael Selfin, Chief Economist at KPMG UK.
“As the Bank mulls over the possibility of bringing the tightening cycle to a close, households and businesses may soon be able to welcome more clarity on the outlook for interest rates. This could unlock some pent-up demand for business transactions which has lately been clouded by uncertainty, as well as bring more stability to the volatile mortgage market.
“However, we are yet to see the full impact of significantly higher borrowing costs on economic activity and inflation. Moreover, the ongoing process of selling the Bank’s holdings of government bonds back to the market could further tighten financial conditions by putting upward pressure on yields.
“The Bank’s updated projections show GDP growth lower in the medium term, driven in part by the market path for interest rates being well above the levels expected in May. Although interest rates may already be near their peak – with a possibility of another hike next month – making the future trajectory of both inflation and GDP potentially higher. Nevertheless, it remains possible that a greater persistence of inflation will not see a policy reversal this soon.”
-ENDS-
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