Policymakers are waiting to see if there was a post-election bounce before deciding whether to cut interest rates
Thursday 16 Jan 2020 Author: Yoosof Farah

A debate has emerged over whether or not the Bank of England should cut interest rates after the economy grew by just 0.1% in the three months to November.

While this figure was slightly better than forecast, the economy shrank 0.3% month-on-month in November, below the flat rate predicted.

Bank of England officials are debating whether to cut the base rate of borrowing from 0.75% to 0.5% to boost spending and get the economy back on track, though data following the election will be key to any decision.

Five monetary policy committee members have hinted they would consider voting for a near-term rate cut. This includes external member Gertjan Vlieghe who told the Financial Times he would vote for a cut if data released later this month shows there was no economic bounce after the election.

Investors will therefore be keeping a close eye on manufacturing and services purchasing managers’ index data on 24 January, as these could indicate where the economy headed in December.

John Hawksworth, chief economist at PwC, said it’s ‘too early to say for sure’ if economic momentum will pick up in the New Year now the political situation is clearer.

But he added that PwC’s latest financial services sector survey ‘does suggest some boost to optimism’ since the election.

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