Rate cut unlikely until 2025 as energy prices blamed for stronger-than-expected inflation of 2.3%
Any lingering hope that the Bank of England might deliver a pre-Christmas interest rate cut next month appears to have evaporated, after official data showed inflation jumping to 2.3% in October.
The CPI measure had been expected to tick up, after dipping to 1.7% in September, but 2.3% was stronger than expected.
Continue reading...New remit given to FCA by chancellor raises fears of a weakening of rules meant to avert another financial crisis
The financial regulator has been ordered to encourage more risk-taking across the City, raising concerns that the Labour government is in danger of watering down rules meant to avoid another financial crisis.
In an official “remit” letter addressed to Financial Conduct Authority (FCA) boss, Nikhil Rathi, the chancellor, Rachel Reeves, said regulations meant to protect consumers should not stand in the way of “sensible risk-taking” by investors and the wider financial sector, which includes banks, asset managers and insurers.
Continue reading...Rare agreement among forecasters gives 96% chance of today’s MPC meeting cutting borrowing costs to 4.75%
The Bank of England policymakers are widely expected to cut borrowing costs for businesses and homeowners by reducing official interest rates from 5% to 4.75% when they meet later today.
Financial markets are overwhelmingly forecasting that the Bank’s nine-strong monetary policy committee (MPC) will reduce rates for a second time when it announces its latest decision at noon.
Continue reading...Economists at investment bank say markets are underestimating likely extent of action by Bank of England
Interest rates are on course to fall to 2.75% by next autumn after the Bank of England reduces the cost of borrowing at each of its nine next meetings, a leading investment bank has predicted.
Economists at Goldman Sachs said that, according to their assessment of the long-term level of interest rates consistent with achieving the government’s 2% inflation target, markets were underestimating the likely extent of the action by Threadneedle Street’s nine-strong monetary policy committee (MPC).
Continue reading...Surprise annual drop to 1.7% in September raises chance of interest rate cuts, increasing budget leeway
Inflation in the UK has fallen to its lowest level in three and a half years, giving a pre-budget boost to Rachel Reeves as expectations grow for the Bank of England to cut interest rates.
Figures from the Office for National Statistics show the consumer prices index dropped sharply to 1.7%, down from 2.2% in August, in a bigger fall than anticipated in financial markets, driven by lower air fares and petrol prices.
Continue reading...Thinktank says tax increases in budget will be necessary even if Rachel Reeves changes fiscal rules
Keir Starmer’s promise to end austerity and rebuild public services will require tax increases of £25bn a year in the coming budget even if debt rules are changed to provide scope for extra investment spending, a leading thinktank has said.
In its preview of the first Labour budget in 14 years, the Institute for Fiscal Studies said Rachel Reeves would need to raise taxes to fresh record levels to meet the government’s policy goals. The chancellor was also warned of the risk of a Liz Truss-style meltdown if the City responded badly to substantially higher borrowing.
Continue reading...Tributes paid to one of the UK’s foremost economics commentators who was also ambassador to Washington
Peter Jay, the former BBC economics journalist and diplomat, has died at the age of 87, his family has announced.
Colleagues in the political and media world paid tributes after he died “peacefully at home” on Sunday. Jay was one of the country’s foremost economics commentators of his time, spending time as the economics editor for the BBC and the Times.
Additional reporting by PA Media
Continue reading...Policymakers vote 8-1 against back-to-back cuts in borrowing costs after inflation stayed above Bank target
The Bank of England has kept interest rates unchanged at 5% as it put its efforts to ease the pressure on household budgets on hold.
The Bank’s monetary policy committee (MPC) voted by a majority of eight to one against launching a back-to-back reduction in borrowing costs amid concerns over lingering inflationary pressures.
Continue reading...Annual rate in August unchanged, and hovering above Bank of England’s 2% target
The UK’s annual inflation rate rose by 2.2% in August, matching the increase in July, as lower petrol prices at the pump were offset by higher air fares.
Figures from the Office for National Statistics (ONS) show the government’s preferred measure of the cost of living remained steady, matching forecasts by City economists and hovering just above the Bank of England’s 2% target.
Continue reading...Pre-election slowdown continues in July despite economists predicting growth of 0.2%
The anticipated post-election bounceback in the UK economy failed to materialise as activity flatlined in July for a second month, , according to the latest official data.
The Office for National Statistics (ONS) said the pre-election stalling of activity in June was followed by another month in which gross domestic product remained unchanged.
Continue reading...Figures from Rightmove show inquiries to estate agents since 1 August up 19% compared with a year ago
The first Bank of England rate cut in four years has triggered an immediate upturn in the UK property market, as cheaper mortgages prompt interest among buyers and drive up house prices.
Figures from the property website Rightmove show the number of potential buyers contacting estate agents about homes for sale since 1 August jumped by 19% compared with the same time a year ago. Contacts in July were up 11% on the previous year.
Continue reading...Catherine Mann says Britain should not be ‘seduced’ by price rises easing to the BoE’s target
The UK should not be “seduced” into thinking the battle to calm inflation is over despite price rises easing to the Bank of England’s target, according to an interest rate setter at the central bank.
Catherine Mann, a member of the Bank’s monetary policy committee, said the underlying price pressures in the economy remain strong and showed that the central bank needed to take a tough stance when it sets interest rates.
Continue reading...Survey reveals net fall in permanent jobs last month amid lengthening slowdown in employment market
The UK’s largest employers have warned the jobs market is cooling amid a slowdown in wage growth in July and a fall in vacancies, extending an almost two-year downturn in hiring demand for permanent staff.
Figures from the Recruitment and Employment Confederation (REC) and the accountancy firm KPMG showed a fall in permanent staff placements in July as large employers made more redundancies and hired fewer new starters.
Continue reading...Niesr forecasts raise doubts over chance of further cuts by Bank of England before end of year
The UK’s economic recovery will accelerate over the next year, forcing the Bank of England to keep interest rates higher for longer, according to the National Institute of Economic and Social Research (Niesr).
Signalling that bets on further interest rate cuts before the end of the year could be misplaced, the thinktank said a modest economic recovery and the threat from persistent inflationary trends should make the central bank more cautious about reducing the cost of borrowing.
Continue reading...Mortgage payers and business owners vainly hope cut to 5% signals return to pre-pandemic era of cheap borrowing
Mortgage payers and business owners will be hopeful that a cut in interest rates to 5% by the Bank of England this week signals a return to the pre-pandemic era of low borrowing costs.
Unless much lower interest bills arrive soon, thousands of homeowners and businesses could be forced to sell up.
Continue reading...Incremental cuts likely over two to three years with rates expected to stay well above pre-Covid levels of 0.75%
Borrowers will breathe a collective sigh of relief. The Bank of England has cut interest rates by a quarter point to 5% and major lenders are shaving their best-buy mortgage offers in response.
Those wanting to get on the housing ladder should find property slightly more affordable after the cut, which ends a year of ultra-high borrowing costs and is the first rate cut in more than four years.
Continue reading...Committee voted by five votes to four in favour of cut as governor says inflationary pressures have eased enough
The Bank of England has cut interest rates for the first time since the start of the Covid pandemic, moving to ease the pressure on households after ratcheting up borrowing costs to combat the worst inflation shock in four decades.
In a finely balanced decision after holding borrowing costs at the highest level since the 2008 financial crisis for a year, the Bank’s monetary policy committee (MPC) voted by a narrow majority to cut its base rate by a quarter of a percentage point to 5%.
Continue reading...Live coverage of business, economics and markets after New Popular Front is largest party in second round of France’s election, with far-right third
The French election has meant that Marine Le Pen’s far-right National Rally (RN) will not be in power, but it has not settled what France’s new government will look like.
The New Popular Front (NFP), the hastily arranged coalition of left-wing parties, won the most seats, but it is far short of a parliamentary majority. The result will mean a lot of negotiation to agree on who will be the new prime minister – let alone on achieving anything meaningful in governing the country.
The French parliament is more divided than ever, made up mainly of three blocs (Left – 182 seats, Centre – 168 seats, Extreme Right – 143 seats) and a number of smaller ones. As we predicted before the elections, no bloc can claim an absolute majority.
Minority government
French political parties “are not used to making concessions in order to create a programme around a coalition with other parties”, and the NFP’s most prominent figure, Jean-Luc Mélenchon demanded its entire programme be implemented. “If political parties maintain such positions, a long period of instability will ensue,” said Ledent.
Learning to cooperate
“Excluding the 80 MPs from the far left and the 145 from the far right, there are over 350 MPs left to form a broad coalition ready to reform France, taking into account the diversity of opinions. In other European countries, including Germany, such a configuration would be quite natural and would result in a government with a clear majority.
Continue reading...Central bank raises concerns over newly elected governments as more than 80 countries go to polls this year
Uncertainty caused by a global wave of elections, starting this weekend in France, risks destabilising the UK’s financial system, the Bank of England has warned.
Officials are concerned about the kind of policies that newly elected governments may enforce in large economies, including the US, where Donald Trump is vying for another term as president in the run-up to the election in November.
Continue reading...Service sector inflation, monitored closely by Bank of England, barely budged in April
The annual inflation rate fell sharply in April. Prices are rising more slowly than at any time in almost three years. Inflation is lower in the UK than it is in the EU.
Even so, the latest bulletin on the cost of living from the Office for National Statistics was mildly disappointing. April’s inflation figure was always going to be good, with a sharp fall guaranteed by the fact the energy price increases of a year earlier were not repeated.
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