Impact of BoE rate reduction on the Retail sector
Commenting on the Bank of England’s decision to reduce the base rate to 0.25%, David McCorquodale, UK Head of Retail at KPMG, said:
“It is unlikely that the BoE’s decision to cut interest rates to 0.25% will have a significant impact on the retail sector and, if anything, it marks a more of symbolic attempt to stimulate economic growth.
“While sterling has taken an initial hit today, depending on how value of the pound performs over the longer term, this will have a knock-on effect on the cost of goods bought and sold. Though today’s competitive market place is keeping prices down in any case so this may not have too much of an impact.
“For saving pensioners – who are not earning much on their savings as it is – the rate reduction is likely to leave them slightly worse off and subsequently they will feel a slight squeeze on purse strings.
“For borrowers - mainly mortgage holders – today’s rate reduction will be good news, but it will take time for any benefit to trickle down with many mortgage holders having opted for fixed-term mortgages of 18 months to 5 years.
“Ultimately, however, it’s important to remember that interest rates have been at a low of 0.5% for the past seven years so a move to 0.25% does not change the dial all that much. Retail, overall, still has to battle with continued changes in consumer spending patterns as well as competition from experiential and leisure attractions which are taking an increasing share of discretionary spend.”
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Jess Liebmann, KPMG Corporate Communications
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