Category Archives: Bank of England

Bank of England cuts interest rates to 5% in first reduction since March 2020

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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%.

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French stock market swings to gain after election surprise; Britvic agrees to improved Carlsberg offer – business live

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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.

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Global wave of elections could hit UK financial system, warns Bank of England

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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.

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Big drop in UK inflation rate disguises more disappointing details

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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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UK inflation falls by less than expected to 2.3%, reducing chance of June rate cut

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Drop in April is smaller than forecast but level is still lowest in almost three years

UK inflation fell to 2.3% in April – its lowest level for almost three years – but the decline was smaller than expected, denting hopes of an early interest rate cut.

City analysts had forecast the annual increase in the cost of goods and services would fall to 2.1%, close to the Bank of England’s 2% target.

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Jacob Rees-Mogg accuses Bank of England of ‘miserable incompetence’ over inflation

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MP criticises policies on interest rates and bond-selling as Tory rightwingers call for review of Bank’s independence

Jacob Rees-Mogg has accused the Bank of England of “miserable incompetence” over its failure to reduce inflation more quickly and its bond-selling strategy, as rightwing Tories prepare to renew their attacks on the Bank’s independence.

The former business secretary accused the Bank of damaging the economy with its interest rate decisions and costing the taxpayer tens of billions of pounds by selling off government debt too quickly in an attempt to reduce its balance sheet – a policy known as quantitative tightening (QT).

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Bank of England keeps interest rates at 5.25% but hints at a June cut

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Policymakers say they want to see more evidence that price pressures are easing before cutting rates

• Business – live

The Bank of England has signalled it could start cutting interest rates as early as June after inflation was found to be “moving in the right direction”, as it kept borrowing costs on hold at 5.25% for the sixth time in a row.

Alongside the decision to keep rates on hold, the Bank said inflation was already on course to hit its target of 2% and would fall to just 1.6% in two years, opening the door to future cuts in interests.

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Interest rates need to stay higher for longer, says Bank of England policymaker

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Megan Greene dampens hopes of August cut while underlying causes of inflation remain ‘persistent’

Cuts in UK interest rates should be “a way off”, according to a Bank of England policymaker, who has said that inflationary pressures will keep the cost of borrowing higher than financial markets expect.

Megan Greene, a member of the Bank’s nine-member monetary policy committee (MPC), which sets interest rates, said financial markets were betting “in the wrong direction” when they judged how quickly the central bank would make its first rate cut.

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MP calls Royal Mail delivery cuts a ‘slap in the face for families’ – as it happened

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Live, rolling coverage of business, economics and financial markets as UK postal service says it wants to cut 1,000 jobs and cut delivery days

The question on economists’ lips after the surprise easing of eurozone inflation is: will the European Central Bank (ECB) cut interest rates as early as this month?

The ECB’s rate-setting governing council, led by president Christine Lagarde, meets next week. Economists expect the council to cut rates in June, but surprising data and some doveish comments from some members of the council appear to have put an April cut into play.

While at first sight this looks like it opens up a possible rate cut in April, the ECB is unlikely to act this month. More data on wage growth will come in May, and the ECB needs to be certain of its path. In President Lagarde’s own words: “we will know a little more in April, but we will know a lot more in June”.

Christine Lagarde’s previous indication that the ECB may not commit outright to a path of rate cuts suggests a cautious approach, but the consensus among economists leans towards a potential cut as early as June, pending further data on wage growth trends.

The challenge here for the ECB is that reaching the last mile target inflation rate of 2% may prove more arduous than anticipated, with incremental decreases seen as most likely.

Will the labour market tighten further now that GDP growth looks to be rebounding? We doubt it and, in fact, suspect the unemployment rate will edge up over the coming months.

A still-low unemployment rate doesn’t necessarily mean wage growth will remain at today’s highs, so it need not worry the ECB nor prevent it from starting its easing cycle. We think wage growth will come down, in line with the fall in inflation in recent months as workers’ negotiating power diminishes. A recovery in productivity would support wage growth even as inflation eases. We think productivity growth is now improving, but slowly does it.

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Bitcoin hits new record high above $70,000; US investor ends Currys chase – business live

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Live, rolling coverage of business, economics and financial markets as exchange-traded funds help biggest cryptocurrency rally

The European Commission’s use of Microsoft email and office software broke its own privacy rules, an EU privacy watchdog has ruled.

Microsoft’s software transferred personal data outside the EU, breaching privacy rules, according to the European Data Protection Supervisor.

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Clare Lombardelli named deputy governor of Bank of England

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Ex-Treasury official and adviser to David Cameron will replace Ben Broadbent, making MPC majority female for first time

The Bank of England’s interest-rate-setting committee is set to become majority female for the first time, after the appointment of a former key adviser to David Cameron and George Osborne as one of its deputy governors.

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.

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UK savers should pick accounts beating rising cost of living while they can

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Many best rates are easy access and notice options rather than ones that lock money away

This week’s news that inflation stayed steady at 4% in January means it is still possible to put your money in a savings account with an interest rate that beats the rising cost of living.

Returns on fixed-rate savings accounts have been falling, but, so far, variable rate deals have remained unchanged.

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Bank of England governor dampens hopes of interest rate cut

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Andrew Bailey says cost of living had been higher than expected in December despite ‘encouraging’ inflation news

The Bank of England governor has doused hopes that better-than-expected inflation news last month will accelerate cuts in interest rates, stressing the need for further evidence of wage moderation before Threadneedle Street moves.

Appearing before the House of Lords economics committee on Wednesday, Andrew Bailey said it was “encouraging” that inflation had remained unchanged at 4% in January but the previous month’s figure for the cost of living had been higher than predicted.

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UK pay growth slows less than expected as workers bid up wages

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December figures prompt predictions Bank of England may cut interest rates later than previously expected

Pay growth slowed less than expected in December, prompting predictions the Bank of England could start cutting interest rates later than previously expected.

Earnings growth, excluding bonuses, fell only modestly to 6.2% in October to December 2023 from a revised 6.7% in the previous three months, as workers continued to bid up their wages amid skills shortages and a record number of people with long-term sickness.

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Fujitsu won £1.4bn in new government contracts after court ruling on Post Office software bugs

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MPs find Treasury-affiliated bodies have engaged Horizon firm since damning 2019 high court judgment

The Japanese technology company Fujitsu, whose flawed technology for the Post Office led to the wrongful prosecution of hundreds of subpostmasters, is confirmed to have held contracts worth more than £3.4bn linked to the Treasury since 2019.

Figures published by the Commons’ treasury committee show £1.4bn of contracts were awarded to Treasury-affiliated organisations after a high court ruling in December 2019 over the company’s software. The judgment found that “bugs, errors and defects” in Fujitsu’s Horizon system could cause shortfalls in Post Office branch accounts.

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UK workers must accept lower pay deals to help beat inflation, says Bank ratesetter

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Deputy governor Sarah Breeden also says firms must rein in profits as there is ‘some way to go’ to meet 2% inflation target

Victory in the war on inflation will require British workers to accept lower pay deals and companies to rein in their profits, a senior Bank of England policymaker has said.

Sarah Breeden, one of the central bank’s four deputy governors, said there was still “some way to go” before inflation would fall back to the 2% target set by the government for the Bank to achieve on a sustainable basis.

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UK ditches post-Brexit Canada trade talks; Vodafone and Three UK merger under investigation – as it happened

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Live, rolling coverage of business, economics and financial markets as Canada says UK was unwilling to give access to agricultural products

Shares in US chipmaker Intel have slumped in pre-market trading after it revealed a weaker forecast of earnings.

Chipmakers have been flying in recent years as shortages followed by the huge hype over artificial intelligence – which is hungry for processing power – prompted investors to pile into the sector.

Although Intel beat estimates, investors’ disappointment in Intel’s datacentre GPU story’s growth can be primarily attributed to the slower-than-expected product delivery and ramp-up.

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Fujitsu government contracts under scrutiny in light of Horizon scandal

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Treasury committee writes to 21 bodies including Bank of England and HMRC to demand details of post-2019 deals

Fujitsu’s receipt of lucrative government contracts despite its role in the Post Office Horizon scandal has come under greater scrutiny after the Treasury committee wrote to organisations including the Bank of England and HM Revenue and Customs to demand details of their contracts with the tech company.

The influential group of MPs told 21 public bodies, including the Treasury itself, to provide information on work given to the Japanese-owned company since 2019, when the high court ruled there had been dozens of bugs and errors in its Horizon IT system.

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UK banks expect sharp rise in defaults on unsecured debt

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Lenders forecast biggest quarterly increase in missed repayments on credit cards and loans since 2009

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Britain’s biggest high street lenders expect the sharpest rise in defaults on unsecured lending since 2009, according to a Bank of England survey, as households come under growing pressure amid the cost of living crisis.

The figures from Threadneedle Street show banks expect a marked rise in the number of people who fail to meet repayments on credit cards, loans and other forms of unsecured borrowing over the next three months.

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UK economy returns to growth amid Black Friday spending lift

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GDP rises by 0.3% in November after October decline, with car leasing and video games fuelling bounceback

The UK economy returned to growth in November after a recovery in consumer spending driven by Black Friday sales, with shoppers hunting for bargains as the key Christmas shopping season got under way.

Gross domestic product rose by 0.3% on the month, after a decline of 0.3% in October, according to the Office for National Statistics (ONS). City economists had forecast more modest growth of 0.2%.

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