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Press Releases Policy publications - Productivity & growth

Bank’s decision to hold fire on rates will comfort business leaders

08 Feb 2018
BofEResponding to the Bank of England’s decision to hold interest rates at 0.5% this month, Tej Parikh, Senior Economist at the Institute of Directors, said:

“With many known unknowns still hanging over the economy, business leaders will be comforted by the Bank’s decision to keep interest rates on hold today. 

“As we enter the crucial 12-month period until our EU departure date, corporates of all sizes will be wavering over investment, product launches, and contingency decisions. That, alongside sluggish business activity in January and the fact that inflation appears to be gradually on its way down this year, suggests low rates remain a prudent stance for the time being.  

“The Bank’s Inflation Report strikes a more hawkish tone, and with growth forecasts upped slightly, the MPC notes that limited capacity in the economy may necessitate faster than expected rate rises. However, the Bank’s suggestion that they will condition tighter monetary policy upon the progress of Brexit negotiations remains important to businesses. The Bank must hold fire at least until we have a clearer picture around the proposed transition arrangement.

“With limited wiggle-room available in both monetary and fiscal policy, clear communication is now a key lever for both the Government and the Bank to anchor businesses’ economic confidence.”

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