KPMG comments on today’s interest rate decision
“Despite the tightening cycle reaching its peak, monetary policy will remain restrictive for some time” says Yael Selfin, Chief Economist at KPMG UK.
“Despite the tightening cycle reaching its peak, monetary policy will remain restrictive.
“With interest rates having now potentially reached their peak in this cycle, Bank officials will be monitoring data for reassurance that the current monetary policy stance is sufficiently restrictive to bring inflation down in the medium term. The MPC will need to weigh the risk of rising energy and global food costs fuelling broader inflationary pressures, against a backdrop of a weakening labour market.
“As expected, the Committee has voted to accelerate the pace of quantitative tightening from £80 billion to £100 billion over the next twelve months. While we don’t expect the asset sales to have significant implications for the path of inflation, a reduction in the Bank’s balance sheet will create headroom ahead of any future crises.
“The general expectation is that interest rates will remain high for some time. But given the already fragile state of the economy and that the full impact of past tightening is yet to fully feed through, we could see the Bank start contemplating cuts from November 2024 onwards, especially if other major central banks loosen policy next year.”
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About KPMG UK
KPMG LLP, a UK limited liability partnership, operates from 20 offices across the UK with approximately 17,000 partners and staff. The UK firm recorded a revenue of £2.72 billion in the year ended 30 September 2022.
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