IoD press release Bank of England leaves interest rates on hold but flags growth concerns

“Today’s 6-3 vote by the MPC to leave interest rates unchanged was as expected by markets and analysts, but the underlying message from the MPC is doveish and the majority voting for a hold smaller than expected. Their forward guidance has notably shifted, with marked reference to the weakness in demand, and a notable downgrade to their expectation for Q4 GDP growth from 0.3% to zero. There is little doubt from reading their minutes that they see a link between the Budget and markedly weaker confidence and activity in the private sector.

“Inflationary pressures have now shifted for the coming year, with wage growth and price-setting expected to lend more persistence to inflation. But it’s unclear whether stronger public sector spending will fill the gap left by a weaker private sector. Geo-political developments add further uncertainty to the outlook and markets will remain sensitive to any upward pressure on government borrowing, adding volatility to borrowing costs for businesses and households. As the new government seeks to change the growth trajectory for the UK, 2025 is set to be a tricky year, with a lot hanging on how well it spends the additional money it has allocated itself.”