KPMG's forecast underscores the necessity of these cuts for sustaining growth in the UK economy.
Despite a prevailing trend towards rate reduction, the BoE opted to maintain the base interest rate at 5.25% in its latest decision, supported by an almost unanimous vote from the members of the Bank’s Monetary Policy Committee, chaired by Governor Andrew Bailey. While inflation figures showed a decline to 3.4%, marking a two-year low, the pressure for rate adjustment intensified.
Governor Bailey emphasized a cautious approach, indicating that the timing for rate cuts has not yet arrived, despite promising indicators of decreasing inflation. The central bank remains steadfast in its commitment to ensuring that inflation meets and sustains the government's target of 2%.
However, KPMG highlights the risks associated with delaying interest rate reductions, suggesting that such delay could exacerbate the prevailing economic fragility.
Market sentiments align with expectations of multiple rate cuts by the BoE, with forecasts suggesting a commencement as early as June. The recent absence of any votes for rate hikes within the committee signals a significant shift from previous inclinations.
In February, the MPC narrowly voted in favor of maintaining the rate at 5.25%, with differing views among its members. This year, nearly a million mortgage holders are anticipated to transition from fixed mortgage rates, adding further complexity to the economic landscape.