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Alpesh Paleja, Deputy Chief Economist, CBI, responds to latest UK interest rate decision

“Today’s announcement was in line with the “cut/hold” tempo on interest rates that we expect for the rest of this year.

“This understandable caution largely reflects a growing trade-off facing the Monetary Policy Committee in setting borrowing costs.  Activity remains weak, but this doesn’t seem to be having much of an impact on inflationary pressure yet. Indeed, our own surveys show that pricing intentions have picked up again, at least in part reflecting businesses reacting to higher employment costs. 

“The MPC have also become more split on whether the persistence in inflationary pressure is driven by a deterioration in the economy’s supply capacity, which means that weaker demand may not have much of an impact in taking the heat out of pricing and wage intentions. The upshot of all this uncertainty is that while interest rates are likely to be cut further this year, the path down will remain gradual.”