We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we will assume that you are happy to receive all cookies on the Business Car website. However, if you would like to, you can change your cookies at any time
The start point for the best source of fleet information |
Despite base rates remaining unchanged, even the CBI accepts that interest rates will rise
Last week's decision by the Bank of England to hold base interest rates at 4.75% should be viewed as a temporary pause rather than any change in direction of the medium-term trend.
Most observers are still expecting a rise to 5% by the year end - with November slated in as the possible date.
The reasons for this thinking are not hard to find. Inflationary pressures still exist in the market and the Monetary Policy Committee needs to bring inflation back down towards its target of 2%. The official rate hit 2.5% in August and the CBI is predicting it could go as high as 2.8% in the first quarter of next year.
Indeed, in a slightly bizarre role reversal, the CBI now seems to accept that a rate rise is inevitable.
Reacting to the latest decision to keep rates on hold, Ian McCafferty, CBI Chief Economic Adviser, said: "While oil prices have come down from their record high, there remain other inflationary pressures in the system that still make a rate rise before the end of the year likely.
"With the economy growing solidly but on course to slow next year, business will hope that when the Bank does make its move, it will be well signalled, and that one increase will be enough to keep inflation well controlled through 2007."
What are these 'inflationary pressures' that everybody seems so concerned about?
“Inflationary pressures still exist in the market and the Monetary Policy Committee needs to bring inflation back down towards its target of 2%.” |
As always, house prices are a major indicator - because rising house prices make many people feel more wealthy and so they are more inclined to go out and spend without worrying about how much things cost.
A report last week from the Halifax indicated that, against all the odds, house prices are continuing to rise by about 8% year-on-year. Although some commentators have suggested the rise is being driven by rapidly rising prices in London, the Halifax report appeared to put paid to that theory. It said prices were up in 10 of the 12 regions it surveyed.
Retail sales are strong too. The latest CBI Distributive Trades Survey found 42% of retailers reported sales in September were up on a year ago and only 28% said they were down. This positive balance of 14% is the highest since December 2004.
The CBI also predicted that new car sales in September would be better than expected and, as reported elsewhere, they came in only fractionally down on last year - well ahead of most industry forecasts. However, unlike many high street retailers, most car dealers do not expect sales growth to continue in the final quarter of the year.
Interestingly, although September is supposed to be a prime retail car-selling month, most of the momentum for new registrations came from the fleet sector. This suggests fleet managers can spot a bargain when they see one.
With most carmakers tightening their incentives in the final quarter, and the rate rise imminent, I'm afraid you may have missed the boat if you did not make your move in the last few weeks.
BusinessCar magazine ©2019
Business Car Magazine © 2020 | Business Car is part of NS Media Group.
