#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.

[vagnocarvalho]

LIBRAS ESTERLINAS 🇬🇧

Bank of England (MPC: 8-1)

Rate maintained - September 2024

[accapitalmarket]

Sterling claws higher after BoE holds rates, UK100 lower

UK stocks bounded higher on Thursday after the Bank of England (BoE), as widely expected, left the cost of borrowing unchanged at 5.0%.

The BoE’s Monetary Policy Committee, which cut interest rates for the first time in four years at its August meeting opted to leave them unchanged by a majority of 8 to 1 this time

UK GDP growth has stalled recently, with data last week showing the economy stagnating for the second consecutive month in July. Analysts had been expecting in a 0.2% uplift.

But data on Wednesday showed inflation holding steady at 2.2% in August, above the BoE's long-term 2% target, while core inflation and services inflation both accelerated.

The BoE rate decision came a day after the US Federal Reserve announced a 50-basis points rate cut. On Wednesday, US stocks were volatile, ending lower after an initial rally, but the bulls won out in early trading again on Thursday, with big gains for all the main indexes.

GBPUSD H1

On currency markets, the rate decisions saw sterling push 0.56% higher against the dollar at 1.3287. Meanwhile, against the euro, the pound was up 0.26% at 1.914.

At the stock market close in London, the blue-chip FTSE 100 was up 0.9% at 8,308, while the broader FTSE 250 index jumped 1.6% to 21,162.

Heavily weighted miners rallied as copper prices hit a two-month high on a weaker dollar, with Anglo American up 3.7% and Antofagasta ahead 4.6%.

Retailers were higher, with JD Sports up 4.6% and Primark owner AB Foods ahead 0.7%, boosted by positive sector news. Clothing retailer Next rose 4.4% as it once again upgraded annual earnings guidance after full price sales in the first six weeks of the second half of the year rose 6.9%, materially exceeded expectations.

UK100 H1

Online grocer and logistics group Ocado rose 2.1% after it upgraded its revenue guidance for Ocado Retail - its joint venture with Marks & Spencer following a strong third-quarter performance which saw retail revenues jump 15%. Marks & Spencer also gained 1.8% on the news.

Elsewhere, Bytes Technology advanced 7.8% as it said trading has remained strong since it updated the market at its annual meeting in July.

But Close Brothers fell 5.6% after revealing it has agreed to sell its wealth management arm for up to £200mln to funds managed by Oaktree Capital Management and as it released in-line full-year results.

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.

[novumtimes]

Bank of England holds rates at 5%

Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. The Bank of England has held interest rates at 5 per cent after inflation remained steady in August, but indicated it may lower borrowing costs again as soon as November. The Monetary Policy Committee’s eight-to-one decision on Thursday came after it cut borrowing costs by a quarter point at its meeting last month. In a signal that another rate reduction is likely as soon as its next meeting in seven weeks’ time, the BoE said it would take a “gradual” approach to loosening policy, assuming there are no material changes in the economy. Sterling rose, briefly hitting its strongest level against the dollar since March 2022, before pulling back but remained up 0.3 per cent on the day at $1.3251. Interest rate sensitive two-year gilt yields rose to 3.94 per cent, up 0.03 percentage points on the day. Some content could not load. Check your internet connection or browser settings. Andrew Bailey, the bank’s governor, said inflationary pressures were easing and that the economy was evolving “broadly as we expected”. “If that continues, we should be able to reduce rates gradually over time,” he said. “But it’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much.”     The BoE decision came a day after the US Federal Reserve cut rates by half a point and a week after the ECB made its second quarter-point reduction of the year. While the BoE cut rates in August, it is treading a wary path towards lower borrowing costs and said on Thursday its decisions were guided by the need to “squeeze” persistent inflationary pressures out of the system. The meeting puts the BoE on a “glide path to a November rate cut,” said Rob Wood, chief UK economist at Pantheon Macroeconomics. “Underlying inflation pressures continue to ease, but the broad data flow suggests little need for urgency,” he added. UK inflation held steady at 2.2 per cent in August — far below its 2022 peak of more than 11 per cent and close to the BoE’s 2 per cent target. But services price inflation has recently edged up. Some content could not load. Check your internet connection or browser settings. The MPC predicted that inflation will edge higher to 2.5 per cent towards the end of the year, while the economy will grow at a subdued 0.3 per cent quarterly pace in the second half. The minutes to Thursday’s meeting said MPC members held a “range of views” over how entrenched domestic inflationary pressures will prove, adding that most believed that further gradual rate reductions will be needed. Recommended The only MPC member to dissent from Thursday’s decision to keep rates unchanged was Swati Dhingra, an external member, who is the most dovish rate-setter and called for an immediate quarter-point reduction to 4.75 per cent. Rate-setters at the BoE meeting made no change to the pace of quantitative tightening — its policy of shrinking its balance sheet. This means that bond holdings will be reduced by £100bn in 2024-25. The BoE is focusing more on alternative economic scenarios following a critical report by former Fed chair Ben Bernanke. Thursday’s minutes referred to three possible future economic cases. In one, inflation would come down as the impact of global shocks such as the pandemic and the Ukraine war faded away. In another, lower growth would be needed to bring inflation down. In a third case, persistent inflation would mean monetary policy would have to remain tighter for longer. Source link via The Novum Times

[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]

UK Employment Data and US PPI Ahead: Technical Outlook for GBP/USD and EUR/USD

1. Pound To Driven by UK Employment

Recently, BoE Monetary Policy Committee’s member Catherine Mann warned that UK inflation might rebound in the coming months. She noted that while inflation has decreased, the price trend may take a long time to fully subside. Mann was one of the policymakers who voted to keep interest rates unchanged at the last meeting.

In August, the Bank of England cut rates by 25 basis points for the first time. However, the central bank took a cautious approach, indicating that more evidence was needed to confirm that inflation was under control. Therefore, future rate cuts may not be too fast or extensive. BoE stated that rate decisions would be based on “meeting-by-meeting”, leading to investors uncertainty about future rate path.

The market, however, currently sees another rate cut by the Bank of England in September, but this expectation largely depends on upcoming economic data. Today’s UK employment data, including average earnings, claimant count change, and unemployment rate, will provide some clues for traders. Strong employment data could hinder the September cuts probability, while weak data might reinforce the case for more cuts.

GBP/USD, D1

On the technical front, GBP/USD rebounded after touching around the 1.2700 level, which also coincides with the 200-day moving average support. This is the second time since May's uptrend that the pair has touched the 200-day MA, potentially marking the recent low.

GBP/USD, H1

In the short term, GBP/USD has rebounded after multiple supports in the 1.2700 to 1.2660 area and has broken above the 1.2730 short-term resistance. This rebound has formed a small trend reversal on the hourly chart, with a bullish crossover between the 20-hour and 50-hour moving averages. This suggests that the recent decline may have bottomed out, increasing the likelihood of a reversal.

Additionally, a wedge or ascending channel pattern has formed. If GBP/USD breaks above this pattern and the 1.2775 resistance level, further upside movement may be expected.

Today’s UK employment data could be a significant catalyst for GBP/USD. Meanwhile, US Producer Price Index (PPI) data, scheduled for release during the US trading session, could also impact the dollar. A lower-than-expected PPI might be bearish for the dollar, potentially driving GBP/USD higher.

2. US PPI Provides Inflation Clues

Tonight, the US Producer Price Index (PPI) will be the first major US economic data of the week for investors. This data could provide key insights into US inflation. If tonight’s PPI data indicates further easing of inflation from producer’s end, the Consumer Price Index (CPI) may also decline, which could strengthen market expectations for a Federal Reserve rate cut and weaken the dollar.

EUR/USD, H4

Following lower-than-expected US non-farm payrolls earlier in the month, EUR/USD saw a significant rise. Although there was a quick pullback after extending gains last week, the price has recently stabilized above the 1.0900 to 1.0910 range. Traders remain optimistic about the euro.

Maintaining above 1.0900 indicates continued bullish momentum, but additional positive factors are needed to push the price higher. Tonight’s US PPI data might serve as the necessary catalyst.

Currently, a clear price range is observed between 1.0910 and 1.0940. A breakout above the 1.0940 level could lead to further gains for EUR/USD. However, with tonight’s PPI data still pending, traders should monitor for potential breakouts from this range.

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.

[novumtimes]

Inflation rises to 2.2% for first time this year in blow to interest rate cut next month

For free real time breaking news alerts sent straight to your inbox sign up to our breaking news emails Sign up to our free breaking news emails UK inflation rose to 2.2 per cent in July, marking the first increase this year and increasing the chances the Bank of England keep interest rates at the same level when they meet next month. The Consumer Prices Index (CPI) inflation rose from 2 per cent in June, but undershot economists’ expectations who had forecast it rising to 2.3 per cent. However, despite the smaller than anticipated inflation increase, it is still above the Bank’s target of 2 per cent and casts doubt on back-to-back interest rate cuts at September’s meeting. CPI services price inflation, which is closely monitored by the Bank, fell by more than expected from 5.7 per cent in the previous month to 5.2 per cent in July. “Inflation ticked up a little in July as although domestic energy costs fell, they fell by less than a year ago. This was partially offset by hotel costs, which fell in July after strong growth in June, said Grant Fitzner, the ONS’s chief economist. Graphic showing UK inflation rate has reached 2.2% (PA Graphics) The latest figures mean that prices are rising faster across the country than in previous months, but still at a slower rate than in 2022 and 2023 when households and businesses were being squeezed during the peak of the cost crisis. The lower than anticipated inflation increase comes after the Bank’s monetary policy committee voted to cut interest rates to 5 per cent earlier in August, a quarter-point reduction. Economists predict that the slight uptick in inflation could mean that Bank policymakers will decide to keep interest rates on hold, but anticipate further cuts before the end of the year. Ruth Gregory, deputy chief UK Economist at consultancy Capital Economics, said: “The smaller-than-expected rise in CPI inflation from 2.0% in June to 2.2% in July (consensus 2.3%, CE 2.1%, BoE 2.4%) and the sharp fall in services inflation from 5.7% to a two-year low of 5.2% will reassure the Bank of England that the disinflation process is on track and opens the door to more interest rate cuts later this year.” (PA Graphics) (PA Graphics) Sarah Coles, head of personal finance at Hargreaves Lansdown, said the inflation rise is “not massively welcome, especially for people hoping to be able to enjoy the new space in their budgets created by wage rises, but it’s not a huge upset either”. “It’s likely to be business as usual at the Bank of England in September, with rates on hold, so it’s unlikely to alter the picture significantly for savers and borrowers,” she said. Luke Bartholomew, deputy chief economist at fund manager Abrdn, said the fall in the rate of services inflation “should help reassure some policymakers that inflation pressures are proving slightly less persistent than feared”. “After yesterday’s solid labour market report, the Bank will not be in any hurry to cut rates again immediately, but the ongoing slowing in inflation pressure means there is certainly scope for at least one more rate cut this year.” The Bank has said it expects inflation to rise to about 2.75 per cent in the second half of this year, amid persistent price rises in the service sector. Inflation will then fall back over the subsequent years to 1.7 per cent in 2026, it predicted earlier this month, then down to 1.5 per cent in 2027. Darren Jones, the chief secretary to the Treasury, said: “The new government is under no illusion as to the scale of the challenge we have inherited, with many families still struggling with the cost of living. That is why we are taking the tough decisions now to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off.” Source link via The Novum Times

[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.”

Related Topics

Personal finance

Inflation

UK economy

Bank of England

Mortgages

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Bank of England holds rates at 5.25%

Monetary Policy Committee’s decision was in line with economists’ expectations