CBI responds to MPC decision on interest rates - November 2024

Alpesh Paleja, Interim Deputy Chief Economist said:

“Today’s cut in interest rates is in line with the gradual loosening in monetary policy that the Bank of England has signalled so far. But while the worst of inflationary pressures are behind us, the Monetary Policy Committee is treading an increasingly fine line. On the one hand, the CBI’s surveys suggest that growth is already shifting down a gear. But on the other, some measures of domestic price pressures – notably services inflation – remain stubbornly high.

“That line has become even finer after October’s Budget. The loosening in fiscal policy is set to stoke inflation a little further, with the resulting short-term boost to demand not matched by a boost to supply potential. The rise in employer NICs will also only add to the cumulative cost burden for businesses, exacerbated by higher interest rates over the last few years.

“On balance, the MPC is still likely to proceed with more rate cuts going forward. But renewed inflationary pressures underscore that the pace will likely be gradual, with the prospect of a faster loosening in monetary policy now fading”.