Cautious approach on rates continues

September 19, 2024

Reacting to the Bank of England’s decision to hold the interest rate at 5%, David Bharier, Head of Research at the British Chambers of Commerce said: 

 

“Today’s decision by the MPC to hold the interest rate at 5% is as expected and shows the Bank is taking a cautious approach to cutting. This follows the Federal Reserve’s bigger than expected 0.5pp cut yesterday, which appears to have boosted investor confidence.  

 

“While inflation has been clearly easing over the last year, yesterday’s ONS data showed some persistent price pressures in core inflation and the services sector, in particular. Our own research has shown that inflation remains a top concern for businesses, but significantly down on the peaks we saw in 2022. 

 

“Many SMEs are looking for a clear path on cutting the interest rate further. Borrowing costs have risen for many of them, particularly those left vulnerable by Covid and Brexit, and this has had a big negative impact on investment intentions. However, with potential further volatility in inflation, the path may be slow and steady. Our own forecast suggests another cut is likely by the end of this year. 

 

“Last month’s rate cut gave businesses who are struggling to invest welcome breathing space. But businesses are now looking to next month’s Budget for further help. Firms understand the fiscal backdrop the Government is facing and the need to address public finances, but that must not be at the expense of investment and growth.”