Pantheon Macroeconomics has released a report projecting that the Consumer Price Index (CPI) inflation rate in the UK will average around 2.7% in 2024, indicating a significant decrease from the 7.0% average in 2023.
Despite this positive trend in inflation, the Monetary Policy Committee (MPC) is expected to maintain a cautious stance on monetary policy adjustments.
The report suggests that the MPC will wait until May to implement a cut in the Bank Rate.
Graham Cox, founder of Self-Employed Mortgage Hub, agreed with the analysis: “To me Pantheon’s analysis rings true. I expect a base rate cut by the spring, despite Bank of England Governor Andrew Bailey trying to convince the markets any cut will be much later in the year.
“After he claimed inflation was transitory and we were facing the worst recession in 100 years, I just don’t have confidence in anything he says frankly.”
Elliott Culley, director at Switch Mortgage Finance, added: “If there was a MPC meeting in April then I think the first reduction would have been then.
“I think March will be too early, considering all the latest rhetoric from the Bank of England to hold steady until late 2024. At the last meeting, three members voted to increase the rate which appears out of step with the economic outlook.
“Inflation is still there right now so May would seem like the right time to act, unless there are any monumental changes to inflation.”
Further reaction
Darryl Dhoffer, mortgage expert at The Mortgage Expert:
“Inflation has been like a runaway horse, galloping through the streets, prices skyrocketing higher than the Burj Khalifa. To tame the wild stallion the Bank of England’s been usin’ the reins of interest rates to slow the beast down. They’ve been crankin’ those rates tighter than Scrooge’s grip on a ledger, makin’ it dearer to borrow a bob or two.
“Now, the good news is, the horse ain’t quite as wild as it was. Inflation’s takin’ a breather, prices aren’t gallopin’ quite so fast. But the Bank Of England isn’t going to pat themselves on the back just yet. They’re like the Grinch guardin’ his territory – cautious, cunning, waitin’ for the right moment to ease up. If the Stallion trots back to a gentle canter like it looks like it is doing, maybe we’ll see a rate cut next spring, like a fresh bloom of hope in the economic wasteland. But if it throws a tantrum and rears up again, the bank might keep that leash tight ’til autumn, maybe even winter.”
Matthew Jackson, director at Mint FS:
“Although February is unlikely for a reduction in base rate I would suspect given the fall in CPI Inflation announced today that March is pretty much a certainty.
“This will push the new year market forward again, drive the economy and reduce the risk of a recession in 2024.”
