Experts comment on latest interest rate decision

22/09/2023
Giles Coghlan (HYCM)

FOLLOWING yesterday’s interest rate decision from the Bank of England, expert commentaries have been released providing analysis of the situation.

Giles Coghlan, Chief Market Analyst consulting for HYCM, said: “There were a lot of moving parts for the Bank of England (BoE) to contend with going into today’s decision. But, with yesterday’s core print still three times higher than the BoE’s target and wage growth remaining strong, the BoE clearly want to stamp inflation into the ground for good.

“However, there is a risk that the ‘lag effect’ on interest rate hikes means that today’s decision may not be felt for another 9 to 12 months. As such, with economic growth already faltering and core inflation remaining high, today’s hike runs the risk of overtightening the economy and inducing a period of stagflation further down the line.

“For investors, they have been expecting the BoE to signal a lower path for rates ahead so the GBP’s reaction may be muted, especially after CPI miss yesterday which weakened the pound further going into today’s meeting. However, the Pound could slide further should the markets foresee stagflation ahead and percieve a BoE policy mistake.”

Andy Mielczarek, Founder and CEO of SmartSave, a Chetwood Financial company, said: “Yesterday’s fall in inflation defied expectation and has released pressure on the Bank of England, allowing for its decision to hold interest rates. 

“However, for savers, the same issue remains: there is a stark difference between the base rate and the interest rates on offer through high street banks. We are seeing too many people being penalised for their loyalty to big banks as they achieve worse returns on their savings. 

“Searching the market for alternative products remains vitally important, and branching out from established high-street names remains one of the best ways for people to lock in a better deal. For those in a position to put away a lump sum, there are a number of fixed-rate products currently topping the base rate that savers can make the most of to grow their money. Crucially, these are covered by the same Financial Services Compensation Scheme (FSCS) protection in the same way as traditional banks, which will offer consumers security and peace of mind.” 

Lily Megson, Policy Director at My Pension Expert, said: “Finally, a week of good news. There is a sense that we may, at last, have turned a corner with both inflation and interest rates both swinging in favour of Britons’ finances. However, this optimistic turn isn’t necessarily prompt celebration. Inflation remains high, people are still adapting to higher interest rates, and last week’s heated discussions surrounding the future of the triple lock will all contribute to a continuing uneasiness among consumers about their financial planning, particularly for retirement.   

“What can we expect in the pensions market? Even though there was no base rate hike today, some pension planners may still consider annuities as the right option for their retirement fund – understandably so, given that they recently reached their highest rates in 20 years. However, it’s crucial that pension planners are not swayed by the headlines and recognise that not everyone shares the same financial objectives in retirement. Despite attractive rates, annuities may not be the golden ticket for everyone.   

“In fact, recent events have underscored the importance of providing support to people preparing for retirement, especially during periods of economic uncertainty, to help them navigate the complex landscape of financial planning. Ensuring the accessibility of affordable, regulated independent financial advice is essential in achieving this goal.” 

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