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Interest rates being lowered in December remains uncertain – London Business News | Londonlovesbusiness.com
With Donald Trump wining the US presidential election, the Bank of England lowering interest rates remains uncertain.
The Banks chief economist Huw Pill said further rate cuts all depends on there being no “big new disturbances” as there is the threat of a global trade war now that Trump is set to return to the White House.
Bloomberg quoted the Bank of England’s chief economist saying, “[Shocks] can have very big effects on the economic performance here, including crucially for us the outlook for inflation.
“There may be some things to which we need to respond quickly and I think dislocations in financial markets and so forth are a good example of that.”
Pill warned that the UK is vulnerable to shocks from other countries such as the US are Britain is a “small open economy.”
There is a 21% chance of an interest rate cut in December according to the market and the Bank’s governor Andrew Bailey said last week that cuts to the base rate will be “gradual.”
On 7 November the Bank of England cut interest rates by a quarter of a percentage point to 4.75%.
Victor Trokoudes, founder and CEO of Plum said, “And now there’s growing scepticism over whether there will be another cut in December. Massive fiscal loosening financed by high levels of borrowing were announced last week by Chancellor Rachel Reeves, and this could mean further inflation, especially in the short term.
“As a result, the UK is now expected to have a slower easing cycle than the US and EU, with the OBR concluding that this higher public spending was likely to mean a slightly shallower path of interest rate reductions.”