The Bank of England published its November Inflation Report on 1st November and concluded that aggregate supply and demand being in balance, there was no need to increase the bank rate at this stage. The Monetary Policy Committee remains of the view that interest rates will need to rise over the planning period to bring CPI inflation (2.4 per cent in September) back to its 2 per cent symmetrical target level by 2021. Oil prices and the depreciation of sterling continue to feed through. Market rates imply an average 1.1 per cent in August next year and 1.4 per cent in three years, reflecting the steer that these rises will be gradual.

Bank wholesale funding costs are rising and effective customer lending rates are edging up, but competitive pressures in the residential mortgage market means that these are still below mid-2016 levels. Deposit rate increases are slower to come through, mirroring the compression of spreads when rates came down at the beginning of the financial crisis. However,the Bank expects increasing demand for deposits to drive rates up next year. Corporate bond spreads have been stable since August.

The Bank is expressing concern about whether the trend to elevated levels of covenant light leveraged lending to corporates in the US is at a level to concern us here in the UK too. Impairment levels are low although we are seeing pressure on certain sectors, including retail. But looking at business lending overall, debt levels are pretty flat and liquidity reserves continue to rise, as companies constrain their investment in the light of Brexit uncertainty. UK Finance data and research such as the Bank of England findings, were last week echoed by the Treasury Select Committee's conclusion that supply of finance is plentiful and subdued demand is holding back growth. To the extent that larger company lending is growing, this reflects merger and acquisition activity more than organic growth.

Meanwhile, despite weak real income growth consumers continue to spend, with the result that the savings rate is at historic low levels. There has been some tightening in consumer credit and overall consumer indebtedness, while high, has been driven more by larger, but affordable, mortgages and the trend towards financing car purchase on PCPs. Bank projections of one per cent per annum increases in labour productivity and low levels of unemployment, indicate very modest growth in consumer spending going forward. Market and UK Finance figures reveal that the housing market remains subdued and especially weak in London and transactions are driven by churn through remortgaging rather than by house purchase or buy-to-let activity. Nevertheless, the Bank expects tight supply conditions to underpin prices overall.

So, all a very steady state which belies the uncertainty over assumptions upon which this is based and the Bank of England sets out the mechanisms through which Brexit effects are likely to be transmitted. Demand for goods and services depends critically on the deal and nature of the transition and consumer confidence. Supply depends on the impact on productive capacity of disruption and redirection of trade and production and of course major shifts in exchange rates and trade flows. How will bank borrowing be affected? Certainly, banks such as RBS have already committed to making funding available for business cashflow where supply chains are disrupted. Equally, with capacity constraints in evidence in many markets, a relief to uncertainty may lead to a pent-up recovery to investment if transition is smooth. But, in the longer run, it is those questions around productivity, competitiveness and innovation that will determine the path of real spending capacity, business growth and success in export markets.