CBI, TUC & IoD Response To MPC Interest Rate Decision

Rain Newton-Smith, CBI Chief Economist, said:

“Signs of a rebound in sentiment since the start of the new decade were clearly enough to keep interest rates on hold.

“Providing that Brexit uncertainty continues to wane - and we see steady progress in the negotiations with the EU - we should see some improvement in economic growth over the course of this year.

“It’s vital we find a pathway to a deal that works for all sectors of the economy, so that businesses get the clarity they need to further invest, create jobs and grow.

“A deal that ultimately protects people and prosperity will unlock the UK economy’s long-term potential.”

Also commenting on the decision by the Bank of England Monetary Policy Committee to keep the base rate of interest at 0.75%, TUC Head of Economics Kate Bell said: “We need a bigger economic debate than just interest rates. Mark Carney is right to say that fiscal policy has an ‘important and powerful role’.

“But instead the Chancellor is planning yet more cuts to departmental spending.

“No more excuses, the government must use the budget to show they are serious about giving communities the public services and investment they need.”

Tej Parikh, Chief Economist at the Institute of Directors, said:

“There is mounting evidence that the UK economy may have experienced a bit of a post-election bounce, so on balance the Bank made the right call to hold interest rates for now.

“Confidence is up, orders are rising, and firms are thinking about making new hires and investments, but with uncertainty still on the horizon, it’s unclear just how much economic activity will change over the course of 2020.

“The MPC will want a clearer run of data to see how underlying economic conditions are reacting to the new political environment, which may place the Bank in a better position to make a decision on rates at its next meeting.

“Another unknown for rate-setters’ calculations is the extent of the fiscal boost at the forthcoming Budget, which backs up their decision to sit on rate changes for now, at least until their next post-Budget meeting in March.

“On the bigger picture, withholding a rate cut today does also afford the Bank greater wiggle-room in the future if uncertainty eats into business activity and the fiscal boost fails to sufficiently stimulate the economy.”