12:35 pm, September 19, 2024
The Bank of England’s decision to keep interest rates at 5% brings a ‘sense of stability’ to the UK motor trade.
That is according to Cox Automotive, which says that the move will allow dealers to move forward with a ‘cautious optimism’ as they head towards the end of the year.
The decision, which had widely been expected, was ratified earlier today (Sep 19) when eight of the nine members on the Bank’s Monetary Policy Committee (MPC) voted to keep the UK base rate unchanged.
In response to the news, Philip Nothard, insight director at Cox Automotive, said: ‘The Bank of England’s decision to keep the base rate unchanged at 5%, following the inflation rate holding steady at 2.2%, brings a sense of stability to the UK automotive sector.
‘While a second base rate reduction would certainly boost consumer confidence, especially as retailers face a potentially challenging period, the current balance of stable inflation and interest rates is welcomed.
‘This consistency provides a foundation for cautious optimism as we approach the year-end, offering relief to consumers and businesses navigating uncertain market conditions.’
The decision to pause comes a month after the central bank cut rates from 5.25%, instigating the first reduction since 2020 and delivering good news to borrowers facing higher costs.
The MPC, which uses interest rates as a tool to control inflation, said it wanted to make sure that persistent inflationary pressures were squeezed out so that price rises remain at the 2% target level.
Consumer Prices Index (CPI) inflation hit 2% in May and June this year, before edging up to 2.2% in July and August, according to official figures.
CPI is expected to tick up further over the rest of the year as the impact of falling energy bills softens.
For the eight members who voted to keep rates the same, a slowdown of price and wage rises, and the UK economy growing in line with forecasts, was evidence that a gradual approach to easing rates was necessary.
They also noted some uncertainty in the global outlook, such as weaker demand for oil leading prices to fall, which warranted the need for caution.
Andrew Bailey, governor of the Bank of England, said on Thursday: ‘Inflationary pressures have continued to ease since we cut interest rates in August.
‘The economy has been evolving broadly as we expected.
‘If that continues, we should be able to reduce rates gradually over time.
‘But it’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much.’
Main image: The Bank of England (Aaron Chown/PA)
