CBI responds to latest interest rate decision

Anna Leach, CBI Deputy Chief Economist, said:

"The decision to once again hold rates at 5.25% is perfectly in line with expectations, including the CBI's own economic forecast. Although inflation has halved over the year, enabling the Prime Minister to meet his New Year pledges, hitting the 2% target is still some way off. We expect this to happen around mid-2025.

"A year of better-than-expected - albeit lacklustre - growth, sticky domestic inflation, high wage growth and uncertainty over energy prices have all played their part in necessitating higher-for-longer rates. While the US Federal Bank is in the welcome position of being able to signal that rates will fall soon, that isn't the case here in the UK.

"2024 is set to be another year of weak growth for the UK, as the pressure of higher interest rates continues to erode household spending power and add to business cost pressures.

"While the Autumn Statement delivered some valuable support for business investment, particularly the announcement of full expensing, businesses will still have to contend with significant skill and labour shortages - which themselves add to costs and impede important investment.

"Long overdue reform of the Apprenticeship Levy would go some way to helping ease these pressures and ensure firms can access the people and skills they need to grow."