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  • Writer's pictureConrad Binding

Expected to be Peak, but lots of uncertainty

From Forecasts + Regional Feedback from Small/Medium/ Large Businesses across all sectors

Headlines – Base Rate

  • 5.25% - “Expected to be Peak, but lots of uncertainty”

  • Market expectations re. Base – “Table mountain – flat-lining moving forward, duration uncertain, i.e. how long this will last.”

  • Cannot rule out another rise – but “close to if not peaking currently.”

  • “No magic number” for what new normal of base rate will look like

  • Average base rate since the bank of England founded in 1694 = 5%

Headlines – Inflation

  • Projected to fall further – but still well above 2% target

  • This morning figure = 6.70% [unchanged from last month]

  • “We expect” inflation to be around 5% by the end of 2023

  • Why coming down? Easing energy/food/fuel – but again still volatile/ uncertain

  • Labour market shortages – fuelling wage growth [thus contributing to inflation]

Headlines – UK Economic growth

  • “Slow but positive in the near term”

  • Overall – still largely flat

  • Normal annual economic growth = 2/3%

  • Business feedback is slightly downbeat – due to higher rates/ cost of borrowing.

  • Still Risk – of ‘mild recession,’ i.e. two consecutive quarters of negative growth

  • Pay growth – continues to rise, but indicators suggest this will slow.

Headlines – UK Housing market

  • Broad consensus = “ Higher rates have depressed the housing markets” – the main driver

  • Mortgage transactions – 25% lower than normal

  • Expect subdued activity until Spring 2024

  • Housebuilders – discounting to keep share prices afloat etc on FTSE

Key Indicators for MPC Decisions

  • Services inflation – as linked to wage growth – needs to come down!

  • Labour market data – high % of Inactive during and post covid – improving but still needs to go further.

Summary /final remarks

  • UK Economy – “overall resilient” – picture not as bleak as 12 months ago

  • But – this December/ Jan – approx. 500,000 fixed rate mortgages due to expire

  • Payments increase – will impact consumer spending

New data – published in November

Contact Kyran Roberts - 02922 710970

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