Interest rates to hit new norm of 3% says KPMG chief economist

Attendees at the Rainmakers Conference heard how Britain’s battered economy is likely to fare over the next couple of years, in a presentation delivered by vice chair and chief economist at KPMG, Yael Selfin.

Selfin said that with inflation now generally under control, this is expected to reach the Bank of England’s 2% target relatively early in this year, with interest rates predicted to be cut to, then remain, at a “new norm” of around 3%.

“We’ve seen an ease in vacancies in the labour market, making it easier for businesses to find staff,” she said. “We are expecting unemployment to pick up a little, but not by much.

“Until recently there have been excess savings due to people not being able to travel during Covid but this is no longer the case.

“However, pay growth is starting to overtake inflation so people are gradually recovering their purchasing power.

“We need to increase our longer term growth in the UK. Before the 2008 recession we were used to seeing annual growth of two to two and a half per cent.

“In order to achieve that again we need to have stronger productivity and one of the ways to tackle that is through business investment.”

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