MPC decision is sticking to the script – London Business News | Londonlovesbusiness.com

Rates cut by 0.25% to 4.75%, MPC voted 8-1 to cut rates, with the dissenter preferring to leave cuts unchanged at 5%.

Inflation is expected to increase to around 2.5% by the end of the year, from 1.7% in September. The market was expecting rates to fall to 4.75% prior to the announcement.

Nicholas Hyett, Investment Manager at Wealth Club, said, “After two weeks of volatile political theatre the Bank’s decision to stick to the script and cut rates is very welcome. Inflation remains moderate and economic growth positive, if anaemic.

The Chancellor will be pretty pleased with the Bank’s assessment of the last week’s budget. Yes it will drive a modest pickup in inflation, but GDP is also expected to be around 0.75% higher next year than it would otherwise have been.

The big unknown is the future path of wage growth. A relatively tight labour market has driven sticky service inflation, but now seems to be easing. The problem is that rises to the minimum wage and National Insurance contributions in the Budget have the potential to keep service inflation higher going forwards if employers pass those costs on.

All in all, this is far from a showstopping set of MPC minutes – it feels like the Bank is happy to wait in the wings and see how the politics plays out.”