Is this good news for your business?

It’s been reported that European and USA  banks are poised to cut interest rates as a result of persistently low inflation.  However, the Bank of England are keen to take a “wait and see” approach with the view that Brexit will be a smooth transition with households and businesses having  time to adjust to the new relationship between the UK and the EU.

For the past two years, prices of the things households and businesses have to buy have been going up by more than the bank of England’s average target of 2%.  This is mainly due to the fall in the pound following the Brexit vote which meant that for businesses purchasing things from abroad have cost more.  This then means that UK businesses have had no choice but to pass on these rising costs to their customers.  However, inflation is now back close to the 2% target as most of the increase in inflation, due to the fall in the pound, has now happened.

As the UK’s interest rates are already as low as the eurozone there is no reason to assume that the bank of England would move in step with its Global peers in cutting interest rates.