High Street woe fuels rate cut talk despite signs the economy has perked up since the election

The pound drifted lower yesterday as subdued spending figures fuelled speculation that the Bank of England could cut rates tomorrow.

The CBI said retail sales were flat in late December and early January as households remained cautious about their finances. 

But over the last three months, sales were the strongest for a year, suggesting consumers feel relatively upbeat.

Key decision: Subdued spending figures have fuelled speculation that the Bank of England could cut rates tomorrow

Key decision: Subdued spending figures have fuelled speculation that the Bank of England could cut rates tomorrow

The report came as members of the Bank’s monetary policy committee weigh up their next move amid signs the economy has perked up since the election. 

Tomorrow’s decision – to hold rates at 0.75 per cent or cut them to 0.5 per cent – is said to be on a knife-edge.

Another cut would be further misery for savers who have suffered more than a decade of dismal returns. 

But it would be a boon for borrowers, slashing the cost of mortgages further.

Howard Archer, chief economic adviser to the Ernst & Young Item Club, said: ‘The survey will likely fan expectations that the MPC could well vote to cut interest rates. 

It remains a very tight call, but we believe there are enough signs overall of improving economic activity for the MPC to sit tight and remain in wait and see mode.’

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CBI deputy chief economist Anna Leach said: ‘Official data and business surveys are painting a picture of subdued activity for retailers. 

‘A challenging Christmas has extended into the new year, with little expectation of any improvement soon.’

 



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