Commenting on the decision of the Monetary Policy Committee of the Bank of England to hold interest rates at 5.25%, Kitty Ussher, Chief Economist of the Institute of Directors, said:

“Business leaders will welcome today’s decision to keep interest rates on hold. It has become increasingly clear over the summer that the Bank’s action to date is having the desired effect of constraining demand and bringing down inflation expectations. That’s why, for the first time, the IoD called for a pause today.

“The economy shrank in July and both core and services inflation came in lower than expected in August. This combined with a more difficult external environment, negative PMI results, a weakening labour market and the anticipated fall in the Ofgem energy price cap in October means that inflation is likely to be substantially lower by the end of the year, and within sight of the Bank of England’s 2% medium-term target in 2024.

“To tighten further would therefore have risked administering an overdose before the existing medicine has had enough time to fully take effect. This is not to say that further calibration may not be needed in future, but it is too early to make that judgement today.”IoD