CBI responds to latest interest rate decision

Anna Leach, CBI Deputy Chief Economist, said:

"The decision by the Bank of England to hold interest rates at 5.25% will come as a relief to households holding back on spending and businesses that have pressed pause on investment. While inflation is following a downward trend towards the 2% target, it’s not clear whether rates will follow suit. Relatively high wage inflation alongside an uptick in services inflation in December means that a rate cut before the summer is increasingly unlikely to materialise.

"However, that won’t stop pressure piling onto the Bank of England to reduce rates as weakness in the economy persists. A rebound in growth in November following the previous month’s decline is encouraging but masks the overall picture of a flatlining economy, still at risk of technical recession. The stakes are high for business bearing the brunt of higher borrowing costs and soft demand. They desperately need certainty on monetary policy alongside a package of measures from government to kickstart productivity and growth.

"The Spring Budget in a General Election year is the perfect opportunity for politicians to support credible solutions. The CBI’s Budget recommendations have the potential to unlock business investment, including a Net Zero Carbon Plan, a globally competitive R&D Tax Credits scheme as well as capping the increase in the business rate multiplier in England for another year."