THE pressure on the Bank of England to cut interest rates fast grew today after the latest figures on the state of the UK economy suggested tough times ahead.
GDP fell 0.3% in November, far worse than economists had expected, increasing speculation that the Bank’s Monetary Policy Committee is poised to move.
City watchers say the rate-setters will be looking for any signs that the economy did not recover after the general election in December and that the so-called “Boris bounce” is a mirage.
MPC member Gertjan Vileghe said in an interview with today’s Financial Times that it had lately been a “close call” whether to cut rates from the present 0.75% and that “it doesn’t take much data to swing it one way or the other”.
He said that the data which comes out towards the end of this month will be key in the MPC’s thinking and that he needs to see an “imminent and significant improvement” to delay a cut.
Sterling fell below $1.30 for the first time this year. It rose more than 10% in late 2019 as the threat of a no-deal Brexit declined and the City expressed its clear relief that Boris Johnson won.
Two members of the nine-strong committee - Jonathan Haskell and Michael Saunders - have already called for a rate cut.
The MPC meets again on January 30, by which time it will have much fresh data to ponder.
The pound fell 0.92c to $1.2972.
Neil Wilson at Markets.com said: “it is worth remembering that this data is backward-looking and before the Tory victory, but this only adds to the sense that the BoE has a neat window of opportunity to cut this month.”
Economists noted that the figures for September and October were revised upwards and that November was bound to be a sluggish month given the general election.
Rob Kent-Smith at the Office for National Statistics said: “The economy continues to slow, with growth in the economy compared with the same time last year at its lowest since the spring of 2012.”