BusinessLDN economic insights briefing with the Bank of England
Huge thanks to our hosts at ICG, our guest speaker Lai Wah Co, and everyone who joined our latest economic briefing with the Bank of England.
Here are the key takeaways for those not able to join us in person:
What goes up, must come down — just not necessarily as quickly. There might have been more encouraging news on the inflation front recently, with this month seeing the largest fall in 30 years, driven by falling energy costs. But some inflation, such as wages, is now more embedded in the economy. Our snapshot Slido poll on the day found that inflation and high input costs remain the biggest barrier to growth for most people in the room.
The financial markets might be getting ahead of themselves by pricing in a rate cut anytime soon. The Bank is keen to stress that things are finely balanced. And the killer phrase is “sufficiently restrictive, for sufficiently long.”
The labour market has been resilient for some time, but there’s now signs of loosening. The strength of the labour market is one of the chief reasons we’ve avoided a recession, but we’re now past the peak. Surveys are indicating wage growth will moderate, and the Bank are forecasting wage growth to return to around 3% by 2025. This cooling of the labour market was borne out by our Slido poll, which showed over three-quarters of firms are now just doing targeted hiring only where absolutely necessary.
It could be slim pickings for growth in 2024. The Bank are expecting the economy to flatline next year with zero growth. This forecast was borne out by our final Slido poll, which showed the majority of firms are budgeting for broadly flat growth next year.
But there are some reasons to be cheerful. London is busy, vibrant and people want to be here. Employers are more confident about getting people back in the office. And AI could be the much-needed game changer on productivity, with its increasing availability able to deliver positive impacts within a year.
Our next economic briefing takes place on Tuesday 20 February 2024.