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Bank of England keeps interest rates on hold

14 September 2017

Today the Bank of England's Monetary Policy Committee has voted to keep interest rates at 0.25 per cent.

James Andrews, Director-Head of Investment Management at Redmayne-Bentley, said: “As expected, the Bank of England voted 7-2 to keep the base rate at 0.25 per cent. Of more interest in the release is the rare guidance that ‘some withdrawal of monetary stimulus is likely to be appropriate over coming months in order to return inflation sustainably to target’ if the economy continues on its current trajectory. This comes in the wake of higher-than-expected inflation figures released earlier this week, with CPI rising to 2.9 per cent year-on-year in August, and with the UK jobless rate at its lowest level in 42 years.

“The Pound has risen in the wake of the release, and it will be interesting to see how markets react to the potential withdrawal of monetary stimulus that has been a key driving force for asset prices in recent years. Seemingly, the expectation from the Bank of England’s guidance is that the economic conditions lead to wage inflation, otherwise any rise in rates without wage rises could see a further squeeze on households as debt costs rise and inflation continues to see real wages fall. It will be a very finely-balanced decision come November’s MPC meeting if current conditions persist.

“In the meantime, given markets’ valuation levels, it would be surprising if we didn’t at least see a pause for breath from equity markets as the news is digested, if not some profit taking by investors.”



Author: Ruth Peterson

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