The Bank of England has decided to keep interest rates unchanged at 4.75%, following a recent vote by its nine-member monetary policy committee. However, three members of the committee expressed a preference for a reduction in the rate to 4.5%.
The Bank’s latest economic outlook suggests that the UK economy has performed more poorly than anticipated between October and December.
This has led to growing speculation about a potential rate cut in the near future, with the possibility of the first reduction occurring as early as February.
Bank of England Governor Andrew Bailey commented on the decision, stating,
“We believe a gradual approach to any future interest rate cuts is the correct strategy, but given the current level of economic uncertainty, we are unable to predict with confidence when or by how much rates may decrease in the coming months.”
Dave Ramsden, one of the Bank’s deputy governors, cited “sluggish demand” and a “weakening labour market” as key concerns influencing the current stance. Despite inflation and wage growth remaining higher than expected, the UK economy is facing ongoing challenges. In its November forecast, the Bank had projected economic growth of 0.3%, but it now revises this estimate to flat growth of 0%.
Kate Nicholls, Chief Executive of UKHospitality, said:
“It’s disappointing that the Bank of England has held interest rates today.”
“A rate cut could have helped incentivise economic growth and relieve the pressure of high interest rates on businesses, particularly those in hospitality saddled with Covid loan repayments.”
“While inflation increasing for the second consecutive month is concerning, generating economic growth has to be the priority.”
“Interest rates coming down and a rethink of changes to employer NICs will both be critical components in providing hospitality businesses with the financial headroom they need to invest and grow.”
