- Bank holds rates at 3.75%
- Four members of the rate setting committee wanted to cut rates to 3.5%
- A rate cut now looks like a question of when, not if
- Longer term we shouldn’t expect a flurry of rate cuts
Laith Khalaf, head of investment analysis at AJ Bell, comments on the latest rates decision from the Bank of England:
“The Bank of England has chosen to hold interest rates at 3.75%, but it was a much closer call than anticipated, with four members of the committee voting to cut. That’s a far more dovish result than was expected, especially when you consider that Andrew Bailey and Catherine L Mann voted to hold, but sound like they are close to nodding through a cut too.
“This will shift enormous focus onto the March meeting, where just one more policy maker voting for a cut could make it a reality. In the meantime, incoming labour market and inflation data could shift markets if it looks like providing more justification for cutting rates.
“In short, it looks like a rate cut is now a question of when, not if. But any excitement over looser monetary policy needs to be tempered by the fact that in the longer term this doesn’t look like being the start of a flurry of rate cuts. The Bank is fine tuning interest rate policy so that inflation lands somewhere near to 2% and stays there, rather than seeking to inject large amounts of stimulus into the economy.
“Of course, this outlook may be blown off course by economic or geopolitical developments. For the moment the Bank remains in cautious mode, but it feels like we are closer to the button being pushed than had been expected. However, if and when the next rate cut materialises, there could then be a lot more wait and see to follow.”
