#Monetary Policy Committee at the Bank of England

[timesofocean]

Turmoil in banking industry could be current biggest threat to global economy

New Post has been published on https://www.timesofocean.com/turmoil-in-banking-industry-could-be-current-biggest-threat-to-global-economy/

Turmoil in banking industry could be current biggest threat to global economy

London (The Times Groupe) – High interest rates, particularly in Europe, could pose the most immediate threat to the global economy due to turmoil in the banking sector.

Markets were shaken by the bankruptcy of Silicon Valley Bank (SVB) and Signature Bank in the US last month, as well as Saudi National Bank’s announcement that it would not be increasing its stake in Swiss-based Credit Suisse. interests interests  global economy

UBS, Switzerland’s largest bank, bought Credit Suisse with government assistance for 3 billion Swiss francs ($3.2 billion). times

As countries around the world struggle with a cost of living crisis and central banks have been raising interest rates to lower persistent inflation, the turmoil in the banking industry came at a bad time.

In an interview with Anadolu, Jon Danielsson, the director of the Systemic Risk Centre at the Department of Finance at the London School of Economics, explained that increasing interest rates to combat high inflation causes banks that have bonds and loans to lose value.

Early in March, SVB announced that it had sold its $21 billion bond portfolio at a loss of $1.8 billion. A discount of $16.5 billion was offered to First Citizens Bank for the deposit and loan portfolio of SVB after it was quickly closed by US regulators.

“When central banks raise interest rates, the aim is to slow growth. The fact that bond prices have fallen is part of the normal consequence when you raise interest rates a lot. That is a channel, the transmission of policy rates onto real activity,” Michael Saunders, a senior economic advisor at Oxford Economics and a former member of the Monetary Policy Committee at the Bank of England, told the Turkish state-run news agency Anadolu.

The US banks tightened lending standards before the recent strains in the banking system, reflecting higher interest rates and slower economic growth expectations, and those who failed had poor management.

[starseedfxofficial]

Why Did the USD Cross the Road? To Meet Bessent, Apparently The Forex market’s been more entertaining than a soap opera lately—and just as unpredictable. The latest twist? The U.S. Dollar (USD) took a bit of a hit after the nomination of Bessent to the Treasury. The USD Index dropped below 107.00, briefly staging a comeback from a 106.79 overnight base, only to stay down. Like buying those too-small shoes on sale, the bounce just didn’t quite fit. EUR and JPY: Making Moves While USD Takes a Breather Thanks to the USD's stumble, the euro (EUR) is making a bit of a comeback. It even flirted with a 1.05 handle, peaking at 1.0501. Picture it like that one friend at the bar who’s got just enough courage to ask someone out—but isn’t quite sure they’ll say yes. If EUR/USD can hold above this level, it’s heading toward the 21st November peak at 1.0555, which would be an interesting dance to watch. Meanwhile, the Japanese yen (JPY) got a boost too, dipping down to 153.56 overnight. It's like an underdog sports team that got a surprise win after the Japanese Cabinet's stimulus package was approved and U.S. Treasury yields took a step back. The 19th November low is sitting at 153.28, waiting to be tested, and we all know how markets love to poke at old lows to see if they hold. GBP's Little Shimmy and Barclays’ Model’s Latest Scoop Over in the UK, the British pound (GBP) has been flexing a bit too. The reason? Bank of England (BoE) talk. Lombardelli reaffirmed the Monetary Policy Committee (MPC) consensus, while Dhingra kept her dovish stance intact. Think of it like that couple in a rom-com—one's trying to keep the family budget, and the other's insisting "just a little splurge won’t hurt." Cable briefly surpassed 1.26 but is now holding about 30 pips below the mark. And, for all you Barclays fans out there—their month-end rebalancing model is hinting at strong USD selling against all major currencies. Time to keep an eye out for those opportunities. PBoC Shakes Things Up, But Will It Matter? The People’s Bank of China (PBoC) set the USD/CNY mid-point at 7.1918 against an expected 7.2257 (previous was 7.1942). In trading terms, it’s kind of like when your friend decides to drive below the speed limit when everyone else is speeding—a surprising, but deliberate, choice. The question is whether it’ll do enough to move the needle in the bigger scheme of things. The Bigger Picture: What’s a Trader to Do? Now, if you’re wondering what all this means for your trading strategy, it’s all about recognizing the underlying shifts. The USD’s recent moves hint at volatility. Remember, month-end flows are just around the corner, and with Barclays’ model pointing towards significant USD selling, it could mean a lot of traders scrambling for positions—so be ready. Hidden Insights You Can Bank On (Literally) - EUR/USD Breakout Potential: Keep an eye on EUR/USD if it closes above 1.0500. The path to the 1.0555 level could be more like a super slide rather than a hill climb, with market flows pushing momentum. - JPY and Yield Dynamics: JPY’s got some backup from yield retreats and stimulus. With yields pulling back, we could see further moves lower in USD/JPY, especially if it makes another jab at that 153.28 level. - GBP Drama: Don’t underestimate the BoE chatter. The divergence between hawkish and dovish voices could lead to volatility—and opportunity. Watch for GBP/USD moves past 1.26, which could open a pathway toward higher levels. - China’s Calculated Moves: The PBoC mid-point might seem minor, but it's a reminder that China's controlling narrative is still in play. Watch how this affects emerging market sentiment. Parting Wisdom Remember, trading isn’t about chasing every shiny new price level—it’s about identifying the underlying currents and riding those with strategic insight. Like a surfer who knows when to catch a wave and when to let it pass, your edge lies in patience and precision. Let the other guys buy the wrong-sized shoes. You’re here to glide, not trip. And hey, if you’re serious about mastering this game, check out StarseedFX’s free trading tools, educational courses, and real-time community insights—because sometimes, you just need a little nudge from the experts to catch that perfect wave. —————– Image Credits: Cover image at the top is AI-generated   Read the full article

[policon]

What are people saying about the Autumn budget? 

What are people saying about the Autumn budget?  Written by Alfie Rushfirth On the 19th November, Governor of the Bank of England, Andrew Bailey and other top Bank of England officials took questions from MPs in a parliamentary committee. This session was to focus on the Bank’s recent Monetary Policy Report, and the recent decision to reduce the interest rate by 0.25 percent to 4.75%, however…

[accapitalmarket]

Fed, BoE double cut, Sterling rebounds, UK100 mixed

UK blue chips ended lower on Thursday as investors digested a slew of corporate news, assessed a rate cut by the Bank of England (BoE), and awaited the latest policy announcement from the Federal Reserve in the wake of Donald Trump’s victory in Tuesday’s US Presidential election.

As expected, the BoE’s Monetary Policy Committee (MPC) voted by eight to one to reduce UK interest rates by 25 basis points to 4.75%. It was the second cut so far this year, after the MPC trimmed rates for the first time in over four years in August. The MPC kept rates on hold at 5.0% at its last meeting in September.

Thursday's cut was widely anticipated after a surprise drop in UK inflation in September to 1.7%, the lowest rate for more than three years and below the BoE's 2.0% target.

The latest data showed UK house prices hit record highs in October. Mortgage lender Halifax said that house prices rose by 0.2% last month following a 0.3% increase in September. Year-on-year, prices were up 3.9% in October following a 4.6% rise the month before. The average price of a UK home increased to £293,999 last month, up from £293,305 in September.

On currency markets, ahead of the US rate decision, sterling was up 0.8% against the dollar at 1.2982 and added 0.1% versus the euro at 1.2017 bolstered by the UK rate move.

GBPUSD H1

After the London close, US rate-setters also decided to ease monetary policy by 25 basis points, as expected. However, the Fed shied away from providing any further forward guidance until the new Trump administration's policies are known and could be modelled.

At the close in London, the blue-chip FTSE 100 index was down 0.3% at 8,140, although the broader FTSE 250 index managed to gain 0.9% to 20,635.

Among the blue-chip fallers, BT Group shed 3.6% as the telecoms giant downgraded its full-year revenue guidance, pointing to both its non-UK operations and a competitive retail environment as the cause.

Supermarket giant Sainsbury’s fell 4.1% after its underlying retail earnings before interest and tax in the first half came in at £503mln, below the company compiled consensus of £516mln.

Other blue-chip fallers after results included engines maker Rolls Royce, down 3.7%, insurer Hiscox, off 3.6%, and media group Auto Trader which lost 7.2%.

UK100 H1

On the upside engineer IMI was the biggest FTSE 100 gainer, up 5.4% as it hailed a resilient third-quarter performance and reaffirmed its full-year adjusted earnings per share guidance.

Miners were also higher as metal prices increased after Chinese exports rose a strong 13% year-on-year in October, more than double the 5% increase analysts had predicted. Antofagasta rose 4.8%, Anglo American gained 3.6% and Rio Tinto added 3.1%.

Disclaimer: The information contained in this market commentary is of general nature only and does not take into account your objectives, financial situation or needs. You are strongly recommended to seek independent financial advice before making any investment decisions. Trading margin forex and CFDs carries a high level of risk and may not be suitable for all investors. Investors could experience losses in excess of total deposits. You do not have ownership of the underlying assets. AC Capital Market (V) Ltd is the product issuer and distributor. Please read and consider our Product Disclosure Statement and Terms and Conditions, and fully understand the risks involved before deciding to acquire any of the financial products provided by us. The content of this market commentary is owned by AC Capital Market (V) Ltd. Any illegal reproduction of this content will result in immediate legal action.

[vagnocarvalho]

LIBRAS ESTERLINAS 🇬🇧

Bank of England (MPC: 8-1)

Rate maintained - September 2024

[riversfunding]

Signs of business confidence

In August, the Bank of England (BoE) lowered interest rates to 5% in the first cut since March 2020, an action which followed a fall in inflation to the 2% target set by The Monetary Policy Committee (MPC). In addition, the UK's economy grew by 0.6% between April and June, making it the second-best performer in the G7.

Read more - https://www.riversfunding.com/news/how-small-business-loans-could-help-businesses-capitalise-on-market-confidence/

[influencermagazineuk]

Wall Street Follows Europe's Lead as US Inflation Drops to a Three-Year Low

Wall Street rebounded Wednesday, tracking gains in both the FTSE 100 and European stocks, after US inflation dropped to a three-year low. The annual rate of inflation in the US dropped to 2.9% last month, raising hope for a possible interest rate cut by the Bank of England. Wall Street rebounded Wednesday, tracking gains in both the FTSE 100 and European stocks, after US inflation dropped to a three-year low. The annual US rate of inflation fell last month to 2.9%, boosting optimism of an interest rate cut by the Bank of England. The Wall Street session conducted on Wednesday was in sync with the markets across Europe, more so because of the FTSE 100, as news broke that the US hit its lowest inflation rate in just over three years. Slowing inflation eased some concerned investors as the outlook for the global economy seemed to be forged into hope. US Inflation Hits New Low The annual inflation rate in consumer prices advanced only 2.9% in July, down from 3% in June, reflecting the smallest increase in prices over a 12-month period since March 2021. On a month-on-month basis, prices grew 0.2%, building on a small decline of 0.1% in June. These numbers may therefore suggest that inflation is finally starting to cool, which will be welcome news for consumers and businesses alike. Markets' Reaction The slowing inflation in the US had a knock-on effect in markets around the world. The UK's leading stock market index, the FTSE 100 of London, inched up by 0.4% to hit a two-week peak. This was across the board, except for industrial metal miners, which came under a little pressure. The major European index, the German DAX, posted only a marginal gain of 0.2%. France's CAC rose by 0.5%. The broader STOXX 600 index gained 0.3%. These increases were certainly a sign of renewed optimism among investors about the global economic situation. Bank of England Interest Rate Decision With inflation cooling, what the Bank of England may do next is becoming a matter of some speculation. UK investors are now pricing in the potential for a September rate cut. Markets anticipate that base rates will be slashed to 4.75% from the current 5% when the Bank of England's Monetary Policy Committee meets next month, Britain's long period of rising quarterly inflation may be over. Inflation is creeping up less since the Monetary Policy Committee last reduced the base rate to its current level from 5.25% on April 10. Consumer Price Index in the UK The Consumer Price Index, a measure that shows the average price change over time paid for a basket of consumer goods and services, rose 2.2% in July. That was just a bit higher than the 2% recorded in both May and June, but below the consensus 2.3%. Though the CPI was up, it was not that terrible in as much as all this while had been assumed, so it could also be the reason for the speculation of a cut in the interest rates. US Markets Respond Positively Wall Street posted broad-based gains at home in the US as investors took the view that inflation is growing at a sluggish pace. Year-on-year inflation to July, the core rate increased by just 3.2%. This was the smallest 12-month rise since April 2021 and good news for investors. The US dollar did slip a little, but. The pound was 0.1% weaker versus the US dollar at 1.2850. It snaps a five-session upswing of the pound against the dollar. This decline did not shake the general optimism throughout the market. What Does This Imply for Investors? As inflation cools, where do you need to be putting your money? Many investors are feeling the pinch of falling interest rates, which are causing them to begin considering repositioning their investment strategies. With reduced interest rates, lending becomes cheaper; hence, expenditure and investment increase. Many investors could now be thinking of investing their money in the stock market since profits for companies would generally rise. In the meantime, lower interest rates could also mean reduced returns on savings accounts and bonds. Those looking for safer avenues might have to be on the lookout for other classes, such as real estate or dividend-paying stocks, to ensure a good interest rate growth and stability, even when interest rates are low. Looking Ahead All central banks are set to come into focus as the global economy is brought to grips with this new set of inflation numbers. This might be crucial for tone-setting by the Bank of England in September and, consequently, every other central bank across the globe. Further gains could be expected in the stock market were the Bank of England to decide to cut interest rates, as lower borrowing costs usually encourage more investment. This should also be in the scheme of things for the US Federal Reserve as it looks at the inflation data in its decision over the next courses to be put in motion. At the moment, the fall in inflation looks welcome, but the future is hardly certain. Investors need to stay informed and be ready to adjust strategies as new information becomes available. In the meantime, the upside impetus from Wednesday's market action can give some hope that the worst part of the inflation crisis might be behind us. Needless to say, it will pay to remain vigilant over the coming months in regards to economic indicators and central bank decisions if smart investment choices are to be made within this changing environment. Read the full article

[leprivatebanker]

The case for holding rates, with Catherine Mann

A conversation with a member of the Bank of England’s Monetary Policy Committee

[sa7abnews]

Bank of England reduces interest rates to 5%, as growth forecasts are upgraded

New Post has been published on https://sa7ab.info/2024/08/06/bank-of-england-reduces-interest-rates-to-5-as-growth-forecasts-are-upgraded/

Bank of England reduces interest rates to 5%, as growth forecasts are upgraded

The Bank of England has this lunchtime reduced interest rates for the first time since the start of the Covid pandemic, dropping its core base rate by 0.25% from 5.25% to 5.0%. Interest rates had previously risen steadily, doing so on 14 separate occasions from 0.1% in October 2021 to 5.25% in the spring of 2023, a level at which they had previously remained for over a year. This lunchtime’s announcement was believed to be in the balance and in the end the Bank’s Monetary Policy Committee (MPC) voted narrowly by 5 votes to 4 for a rate cut.    The Bank’s Governor, Andrew Bailey, cast the deciding vote for an interest rate cut. As part of today’s announcement the Bank of England has also raised its annual growth forecast for the UK economy from 0.5% to 1.25%. Today’s announcement will be welcomed by mortgage holders, with some 560,000 UK households said to be set to refinance a fixed mortgage between now and the end of 2024.  For the 1.2 million UK households who currently have a ‘tracker’ mortgage, today’s announcement will equate to an average saving of just under £400 per year. Reacting to the Bank’s decision, the new Chancellor of the Exchequer, Rachel Reeves commented, “The cut in interest rates will be welcome news, but millions are still facing higher mortgage rates after the disastrous mini-budget”. The former Chancellor, and now Shadow Chancellor, Jeremy Hunt also welcomed today’s announcement.  Suggesting that the new Labour government had inherited an economy that was on ‘the right track’, Mr Hunt said, “In government, we took difficult decisions that cut inflation from 11.1 per cent to the Bank’s target 2.0 per cent, paving the way for lower rates”. With two thirds of sitting Conservative MPs having been defeated in last month’s general election, this apparent change in the trajectory of the UK economy, is likely to lead some to further question Rishi Sunak’s decision to call this year’s electoral contest as early as he did. The Building Societies Association (BSA) has welcomed today’s move stating, “Today’s cut in Bank Rate marks a turning point in what has been a very difficult two and half years”. Speaking on behalf of the BSA, Paul Broadhead, Head of Mortgage and Housing Policy, said, “The news will be welcomed by many homeowners and aspiring first-time homebuyers. Whilst a 0.25% cut in the rate to 5%, will not have a significant impact on the overall cost of mortgage payments, it is likely to boost to consumer confidence and lead to an increase in housing market activity”. The General Secretary of the Trade Union Congress, Paul Nowak also welcomed today’s move, saying, “This rate cut will give relief to millions of families and businesses – and needs to be the first of many”. The extent to which interest rates now embark on a fast downward trajectory does though appear uncertain, with the CBIs deputy chief economist, Alpesh Paleja warning, “At best, there is only mixed evidence that inflation persistence has been defeated. While the labour market is loosening and wage growth slowly easing, the unexpected strength in services inflation remains a red flag” The minutes of the previous MPC meeting had expressed concern that this April’s increase in the National Living Wage was creating cost pressures for some businesses.  Greg’s the bakery chain has already commented that cost pressures were causing it to raise its prices with the chain increasing the price of its sausage roll by 5p earlier this week.   . The post Bank of England reduces interest rates to 5%, as growth forecasts are upgraded .

[petnews2day]

Bank Rate Held At 5.25% Despite Inflation Hitting Target – Forbes Advisor UK

New Post has been published on https://petn.ws/rqsB1

Bank Rate Held At 5.25% Despite Inflation Hitting Target – Forbes Advisor UK

20 June: Market Eyes August For Possible Cut To 5% The Bank of England has kept borrowing costs at a 16-year high of 5.25%, the seventh occasion since August last year that it has left the Bank Rate unchanged, writes Andrew Michael. Today’s announcement saw the Bank’s Monetary Policy Committee (MPC) decide by seven votes […]

See full article at https://petn.ws/rqsB1 #PetFinancialNews

[enterprisewired]

Bank of England Holds Rates Amid Inflation Dip

Central Bank Signals Potential Cuts as Inflation Eases

In its latest decision, the Bank of England (BoE) opted to maintain interest rates at 5.25%, signaling a potential shift towards rate cuts as inflation dips below expectations. The Monetary Policy Committee (MPC) voted 8-1 to keep rates unchanged, with one member advocating for a 25 basis points reduction to 5%. This decision marks a departure from previous meetings, where two members had favored rate hikes.

Encouraging Signs of Falling Inflation

Bank of England Governor Andrew Bailey cited encouraging signs of decreasing inflation in recent weeks. Headline inflation dropped to 3.4% annually in February, reaching its lowest level since September 2021. Bailey emphasized the need to ensure inflation returns to the 2% target and remains stable before considering rate cuts.

Balancing Act Amid Economic Challenges

The UK economy, having slipped into a technical recession in the final quarter of 2023, faces a delicate balance between reining in inflation and preventing a prolonged downturn. Despite two years of stagnation, the Bank of England aims to navigate this challenge by maintaining a restrictive monetary policy until inflation stabilizes sustainably at the target rate.

Market Interpretation and Expert Analysis

The announcement prompted Sterling’s retreat and a rally in UK bonds, indicating market interpretation as a dovish pivot. Experts suggest that the MPC’s shift reflects cautious optimism regarding future rate cuts, considering factors such as labor market conditions, wage growth, and services inflation.

Suren Thiru, Economics Director at ICAEW, criticized the Bank of England’s cautious approach, urging for timely rate cuts to alleviate economic struggles. Meanwhile, PwC Chief Economist Barret Kupelian emphasized the need for concrete evidence of cooling inflationary pressures before any decisive action.

Global Economies Anticipate Rate Adjustments

Central banks worldwide are poised to declare victory in the battle against inflation after two years of rapid tightening. Following the Swiss National Bank’s rate cut, the Bank of England’s tone has notably softened, with expectations of transatlantic rate cuts by summer.

Hussain Mehdi, Director of Investment Strategy at HSBC Asset Management, anticipates a slow-cutting cycle as central banks adjust rates to stabilize inflation. Despite potential hurdles, such as labor market dynamics and core CPI disparities, experts foresee a gradual easing cycle, culminating in rates around 3%.

As inflation remains elevated compared to the 2010s, HSBC predicts a prolonged period of rate adjustments amidst a fragmented global economy and continued fiscal policy interventions.

In conclusion, the Bank of England’s decision to maintain rates amidst falling inflation signals a cautious yet optimistic approach towards future monetary policy adjustments, as central banks worldwide navigate the complexities of stabilizing economies amid inflationary pressures.

Also Read: Navigating Organizational Success: An In-Depth Exploration of Management Models

[accapitalmarket]

BoE hints gradual easing, GBPUSD drops, UK100 lower

UK stocks closed lower on Wednesday, retreating after some hawkish comments from a Bank of England (BoE) policymaker and as energy heavyweights dropped in tandem with weaker oil prices.

BoE Monetary Policy Committee (MPC) member Megan Greene said she believed the risks to activity are to "the upside", and that she favoured a "gradual approach to removing restrictiveness." Greene was one of the MPC members who voted to hold rates in August. The BoE ultimately cut rates by 25 basis points to 5.00% in a 5 to 4 decision then but held them at that level this month by an 8-1 majority.

Meanwhile, the Organisation for Economic Co-operation & Development has placed the UK joint second in its economic growth forecasts for the rest of 2024. The prediction of 1.1% growth for the whole of this year puts the UK alongside Canada and France but behind the US. However, its prediction of 2.7% inflation for this year means the UK is still the country in the G7 with the fastest-rising prices.

GBPUSD H1

On currency markets, the pound was weaker, losing 0.63% versus the US dollar to 1.3328, and down 0.24% against the euro at 1.1967.

At the stock market close in London, the FTSE 100 index was down 0.2% at 8,268, while the FTSE 250 ended 0.1% lower at 20,755.

Among the oil heavyweights, BP shed 2.4% and Shell lost 1.6%. Brent crude has fallen 9.3% over the past month and is down 19% in the year to date.

But elsewhere with commodities, the recent strength in the gold price continued to support Fresnillo, up 3.4%. And copper miner Rio Tinto added 0.6% helped by some positive comments as analysts visited some of the miner's Canadian operations.

Meanwhile, positive comments from analysts at JPMorgan on the airline sector boosted British Airways owner International Consolidated Airlines, up 0.8%, and easyJet, ahead 2.2%.

UK100 H1

Beazley was also hoisted higher by broker comment, up 1.0% as analysts at Deutsche Bank raised their price target and reiterated a buy rating on the insurer.

Among other blue-chip gainers, Rentokil added 4.5% after activist investor Brian Baldwin secured a seat on the board. Baldwin is the head of research of Trian Fund Management, an investment management firm, run by Nelson Peltz.

Paddy Power owner Flutter Entertainment gained 6.9% after it announced a £5bn share buyback and said it is targeting doubling annual profit by 2027. And DFS Furniture rose 6.6% as the retailer said it sees increasing reasons to be optimistic even after reporting two years of revenue declines.

Disclaimer:

The information contained in this market commentary is of general nature only and does not take into account your objectives, financial situation or needs. You are strongly recommended to seek independent financial advice before making any investment decisions.

Trading margin forex and CFDs carries a high level of risk and may not be suitable for all investors. Investors could experience losses in excess of total deposits. You do not have ownership of the underlying assets. AC Capital Market (V) Ltd is the product issuer and distributor. Please read and consider our Product Disclosure Statement and Terms and Conditions, and fully understand the risks involved before deciding to acquire any of the financial products provided by us.

The content of this market commentary is owned by AC Capital Market (V) Ltd. Any illegal reproduction of this content will result in immediate legal action.

[featurenews]

Clare Lombardelli named deputy governor of Bank of England

Ex-Treasury official and adviser to David Cameron will replace Ben Broadbent, making MPC majority female for first time * Business live – latest updates A former Treasury official and key adviser to David Cameron and George Osborne has been appointed as a deputy governor of the Bank of England, in a move that will make its interest-rate-setting committee majority female for the first time in its history. Clare Lombardelli, the chief economist at the Organisation for Economic Co-operation and Development (OECD), will sit on the nine-member monetary policy committee (MPC) when she joins as the Bank’s next deputy governor for monetary policy. Continue reading... https://www.theguardian.com/business/2024/feb/29/clare-lombardelli-deputy-governor-of-bank-of-england?utm_source=dlvr.it&utm_medium=tumblr

[olko71]

New Post has been published on All about business online

New Post has been published on https://yaroreviews.info/2024/02/bank-of-england-moving-closer-to-interest-rate-cut

Bank of England moving closer to interest rate cut

Reuters

By Dearbail Jordan & Faisal Islam

BBC News

The Bank of England has held interest rates at 5.25% but indicated it is edging towards cutting borrowing costs.

At its latest meeting, the Bank said it had discussed cutting rates, with inflation – the pace of price rises – set to fall quickly this year.

But the Bank’s governor said it would wait for firm evidence that inflation was under control before doing so.

For the first time since the 2020 Covid pandemic, one Bank policymaker voted for an immediate cut.

However, while Swati Dhingra voted to cut rates to 5%, two members of the Monetary Policy Committee (MPC) backed an increase to 5.5%. The remaining six members voted to keep rates unchanged.

It is the first time there has been a three-way split on whether rates should rise, fall or be held since the 2008 financial crisis.

The Bank has been raising rates steadily over the past couple of years to try to reduce inflation, with the last rate rise in August last year.

Higher interest rates cool inflation by making borrowing more expensive, discouraging people and businesses from taking on debt to fund spending.

Inflation has fallen sharply from a 40-year peak in October 2022 and currently stands at 4%.

The Bank is charged with keeping price growth at, or close to, a target of 2%.

It said in its latest inflation report that the figure would fall back to that target between April and June this year – quicker than it had previously expected.

Follow live: Bank of England holds interest rates at 5.25%

What are UK interest rates and when will they fall?

“We have had good news on inflation over the past few months,” Bank governor Andrew Bailey said, telling the BBC that he is “optimistic” that it is heading in the right direction.

The Bank’s latest release also dropped the phrase it has used previously about a “further tightening in monetary policy”, which is being seen as a sign that no more rate rises are expected.

But while the Bank is now suggesting that rates have peaked, Mr Bailey signalled that any cut in interest rates may still be some months away.

“We need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates,” he said.

The Bank is expecting a slight rebound in inflation over the summer, and at the Bank’s news conference Mr Bailey said this was “not an acceptable state of affairs”.

This suggests that any rate cut may not come as quickly as many expect.

The Chancellor, Jeremy Hunt, said: “It’s obviously very positive news for families with mortgages that interest rates appear to have peaked, but we should remember that inflation never falls in a straight line.”

There is concern among some economists that the fall in the inflation rate towards the Bank’s target is “artificial”, due to the cut in the energy price cap, and that inflation will rebound somewhat over the summer as global energy prices have picked up.

In addition, growth in pay remains strong, with the Bank’s survey of hundreds of companies pointing to a 5.4% rise in wage settlements this year.

Dr Dhingra, the economist who voted for a cut, pointed to risks from geopolitics, and the fact it takes a long time for rate decisions to affect the economy.

The Bank’s new forecasts indicate that keeping rates at their current level could push a barely growing economy into an outright recession.

Paul Dales, chief UK economist at Capital Economics, said that the Bank “sent some soft signals that the next [interest rate] move will be a cut, but it pushed back more strongly against the idea that rates will be cut soon or far”.

However, Mr Dales said he expected a faster fall in inflation and predicted the Bank would “change its tune in the coming months”.

“A rate cut in June is still possible and we think rates will end 2025 at 3%,” he added.

Yael Selfin, chief economist at KPMG UK, said she thought the Bank would be wary of keeping rates too high for too long, “particularly with the impact of previous rate hikes yet to feed through to the economy”.

“However, we expect the Bank to pause for some time yet before beginning to cut interest rates,” she said. “Cuts could happen from the summer onwards.”

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What are UK interest rates and when will they fall?

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[cavenewstimes]

BoE holds interest rate at 5.25% amid inflationary pressures and economic stagnation

The Bank of England (BoE) has actually supported its 5.25% rates of interest, differing its custom of rate boosts in a relocation that mirrors the actions of the United States Federal Reserve and European Central Bank. The choice was made by the Monetary Policy Committee (MPC) in a 6-3 split, marking the 2nd hold after a series of 14 walkings started given that late 2021 to fight inflation. In…