IoD press release MPC unlikely to lower rates in December as inflation moves up
Commenting on today’s data from the Office for National Statistics, that showed the annual rate of CPI inflation rising to 2.3% in October 2024, Anna Leach, Chief Economist at the Institute of Directors, said:
“Inflation has moved up pretty much as expected, reflecting movements in the OfGem price cap. Elsewhere recent official data on wages has also come in in-line with the Bank of England’s forecasts. But economic conditions are evolving rapidly following a painful Budget for business, that significantly increases the costs of employment and injects inflationary pressure into a constrained economy. Inflation is now set to be higher for longer as firms pass through the impact of higher costs into higher prices, and as higher public spending over the next couple of years further generates inflationary pressures. Interest rates are likely to come down more slowly, adding to financing costs for both households and businesses, constraining consumption and investment.
“Unfortunately, while the recent Budget stabilised the public finances, it has undermined growth in the private sector, shattering business confidence and renewing inflationary pressures. Broader efforts to improve the environment for investment have been overwhelmed by distortionary tax raising measures. We will continue working with the government to improve the operating environment for business, for example, through pushing for tax simplification to move up the government priority list and engaging in the consultation process around workers’ rights.”