27 01 2020

Will the Bank of England still cut interest rates?

The latest PMI data on manufacturing and services output in the UK indicates that the economy rose at a quarterly rate of 0.2% in January.

Given business activity is picking up, the Bank of England (BoE) might choose not to cut interest rates, says IHS Markit's chief business economist Chris Williamson and EY Item Club's chief economic advisor Howard Archer.

However, Neil Wilson, chief market analyst for Markets.com disagrees.

"The harder data we’ve seen has been a lot less auspicious. GDP is weak and inflation has come off sharply, albeit the base effect is at play.

"The Bank doesn’t want to get behind the curve of market expectations, and is seeking to get a jump on markets whilst still teeing up the cut.

"It would be following the Fed’s playbook in cutting early in order to prevent a downturn. This is the key thing to remember – the Bank does not want to let a weaker economy fester."