KPMG comments on today’s interest rate decision

“Bank of England opens the door for rate cuts later this year” says Yael Selfin, Chief Economist at KPMG UK.

“Favourable developments in the Bank of England’s battle against inflation, coupled with continued weakness in the domestic economy, have enabled the MPC to tentatively shift its hawkish stance. While interest rate cuts as early as spring may be premature, the MPC’s forward guidance was more dovish.

“Wage-price spiral worries have receded in recent months, with the Bank revising down its forecast for both wage growth and inflation relative to November in the short term. Nonetheless, persistence in services inflation together with disruptions in the Red Sea pose a potential risk to the inflation outlook, with the latter adding an upside risk to goods price inflation.  

“The Bank of England will be wary of running the risk of overtightening, particularly with the impact of previous rate hikes yet to feed through to the economy, and with the Fed and ECB expected to cut rates several times this year. However, we expect the Bank to pause for some time yet before beginning to cut interest rates. Cuts could happen from the summer onwards, by around 100 basis points in total this year, with interest rates potentially settling at around 3% by the second half of 2025.” 

-ENDS-  

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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.  

KPMG is a global organisation of independent professional services firms providing Audit, Legal, Tax and Advisory services. It operates in 143 countries and territories with more than 265,000 partners and employees working in member firms around the world. Each KPMG firm is a legally distinct and separate entity and describes itself as such. KPMG International Limited is a private English company limited by guarantee. KPMG International Limited and its related entities do not provide services to clients.