Rates could come down soon!

Businesses in Coventry and Warwickshire have been told that there is a strong belief in financial markets that interest rates will come down by the end of the year – but that the Bank of England is weighing up a range of factors when it sets base rate.

Graeme Chaplin, the Bank of England’s Agent for the West Midlands, met members of the Coventry and Warwickshire Chamber of Commerce in an online forum to get a sense of how firms from different sectors are performing in the current economic climate. The event came hot on the heels of the Bank of England’s Monetary Policy Committee (MPC) voting eight to one to keep interest rates at 5.25 per cent.

Graeme said: “Meeting businesses and hearing how they are doing and what challenges they are facing is crucial to the work of the Bank.

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find the people and skills they need to fill job vacancies. At the same time, real wage growth continues to rise, ramping up the cost of employment. All this acts as a brake on activity, profitability and investment.

“Government and employers need to find ways to bring more people back into the workforce and to train them for our current and emerging skills needs. As well as investing more in skills, it means removing barriers to work and ensuring job seekers are well prepared to succeed in the workplace.

“Employers offering fairer and more flexible workplaces are often more successful at attracting and retaining talent in a competitive labour market.

“However, we are concerned by the growing number of people not looking for work, with a large chunk of those out of action due to long-term health issues. More must be done to help people with ill health stay in work and to help employers understand how best to support them.

“Until we get more people permanently back into the workplace then the upside risks of higher inflation and interest rates will remain.”

“It also gives me a chance to let business owners know the MPC’s thinking when it is setting rates and the factors that affect its decisions.

“Consumer price inflation fell to 3.4% in February, and there are indications that the labour market is loosening, but private sector wage growth is still at around six per cent.

“It is important to be clear that inflation falling doesn’t mean prices on average are going down – it just means they are going up less rapidly!”

“Bank Rate will need to remain restrictive for sufficiently long to return inflation to the two per cent CPI target sustainably in the medium term.”

Sean Rose, head of policy at the Chamber, said: “We are always grateful to Graeme and the team at the Bank of England for listening to businesses in Coventry and Warwickshire and for using that intelligence to inform their decision-making process.

“It is still a very mixed economic picture and we’d urge businesses in the region to ensure they are talking to the Chamber if they need support to help them grow even in challenging times.”