Monetary policy tone shifts despite widely anticipated interest rate hold

The tone of messaging from those in charge of monetary policy seems to be shifting, according to Greater Birmingham business leaders.

These remarks come after the Bank of England decided to hold interest rates at 5.25 per cent for the seventh time in a row.

The decision to maintain interest rates comes despite official figures on Wednesday which revealed inflation had fallen to the Bank's target of 2 per cent for the first time in nearly three years.

However, the move by its Monetary Policy Committee (MPC) to continue the current 16-year high in rates had been widely expected by economists and financial markets.

Seven members of the panel voted to hold, while the remaining two backed a 0.25 percentage point cut.

Birmingham Chambers of Commerce external affairs director Raj Kandola said: "Yesterday's decision to hold interest rates was widely anticipated in advance despite the recent fall in levels of inflation.

"Nevertheless, the tone of messaging from those in charge of monetary policy seems to be shifting.

"Clearly the markets are pricing in an interest rate cut in August as the value of the pound following today's announcement.

"With a cooling labour market and stagnant economic growth, the clamour to cut rates will only grow in the coming weeks.
However, monetary policy alone cannot unlock long term growth - clearly we will need to see a complimentary fiscal approach which encourages business investment and alleviates costs pressures for those firms struggling with huge overheads."