Commentary: Bank of England interest rate hold

William Marshall, Chief Investment Officer, comments on today’s interest rate hold from the Bank of England.

02 Nov 2023

Blue, red, yellow and green paper boats in dark water.

Commenting on the interest rate hold from the Bank of England, William Marshall, Chief Investment Officer – Hymans Robertson Investment Services (HRIS) says:

“Earlier this week, the British Retail Consortium released data showing a large fall in high-street inflation, especially for food. In addition, signs that the labour market is weakening have continued to emerge over the past few weeks, with unemployment rising and wage growth falling, although still high. Other sources of data indicate that wage growth might even be lower than the official figures. The BoE has started to put more weight on these alternative data sources such as HMRC’s PAYE, especially as the ONS recently cautioned that the accuracy of their labour market data is becoming increasingly uncertain. Potentially dodgy data is far from ideal for the BoE but they will take comfort that it is at least heading in the right direction.

“Although it is looking increasingly likely that we have reached the peak in interest rates, the BoE has been keen to reiterate that they expect rates to be held at this level for a sustained period of time – markets are not pricing in a rate cut until next Autumn.

“Investors might think that the level of interest rates on offer makes it an opportune time to save in cash rather than investing. It is correct that cash is more attractive than it has been for a number of years, but the same can be said for bonds and other assets that should still deliver better returns in the long-term.”