Displaying items by tag: Bank of England

UK inflation has dropped to 3.4%, the lowest in over two and a half years, potentially signalling a Bank of England (BoE) interest rate cut this summer. This decrease, primarily driven by slower food price increases, may lead to cheaper mortgages, providing relief to homeowners. Initially predicted at 3.5%, the February inflation rate was pleasantly surprising, especially as food inflation fell to 5% from 7% in January. The decline supports Rishi Sunak's commitment to reduce inflation, and aligns with the BoE's target of 2%. This news prompted NatWest to lower mortgage rates even before the BoE's decision. Financial markets expect the BoE to maintain the current 5.25% interest rate, but the reduced inflation increases the likelihood of a summer cut, which could significantly lower mortgage payments. However, renters face contrasting challenges, with rental costs rising at record rates due to market constraints. The average UK rent soared by 9% over the past year. As homeowners anticipate potential financial relief, renters continue to struggle with escalating living expenses.

Bank of England governor Andrew Bailey, addressing MPs, has expressed optimism about the UK economy despite a recent shallow recession. He noted 'distinct signs of an upturn’, foreseeing one of the mildest recessions in modern history. The Bank's measures, including fourteen consecutive interest rate hikes, aimed to bring inflation back to 2% to help allow for sustainable growth. The bank’s reluctance to cut interest rates reflects worries over the outlook for inflation later in the year. Bailey cautioned against complacency, citing uncertainties such as energy costs and shipping disruptions. Asked about the timing of cuts in the interest rate, he refused to say when or by how much this might happen: his deputy said this would be based on ‘data not dates’.

Bank of England governor Andrew Bailey has identified 'global shocks' as a significant threat to the UK economy. During a treasury committee session, he expressed concerns about the situation in the Red Sea, especially regarding oil supplies. Recent attacks by Iran-backed Houthi rebels on cargo ships in the Suez Canal have prompted some vessels to reroute for safety reasons. Oil giant BP even temporarily halted all oil shipments through the Red Sea due to the threat. Bailey said that these disruptions could impact shipping prices and costs, which would have implications in the monetary policy realm. However, he noted that there has not yet been a prolonged spike in oil prices. Deputy governor Sarah Breeden also highlighted the threat of uncertainty, encompassing macroeconomic conditions, geopolitical tensions, credit risks, and unemployment. Regarding the UK housing market and interest rates, Bailey observed that market interest rates have recently decreased, resulting in lower mortgage costs.

The Bank of England has maintained its interest rate at 5.25% for the third consecutive meeting. This decision reflects the Bank's stance that borrowing costs need to remain high for an extended period to combat inflation, which is still well above the target rate. Unlike the US Federal Reserve, which hinted at potential rate cuts next year, the Bank of England, led by Andrew Bailey, suggests that the UK is not yet in a position to consider such reductions. Bailey expressed that it is too early to speculate about cutting rates, emphasising the need for more progress in controlling inflation. The decision was not unanimous, with three members of the Monetary Policy Committee (MPC) arguing for a rate increase, but they were outnumbered by the six others. Despite faster-than-expected inflation drops and signs of economic weakness, the Bank is cautious about reducing rates too soon, fearing a resurgence in inflation. Bailey noted that while significant progress has been made in reducing inflation from over 10% in January to 4.6% in October, there is still a journey ahead to reach the 2% target.

In October, UK inflation significantly decreased to 4.6% from 6.7%, marking the lowest rate in two years and a major easing of price pressures. This represents the most substantial monthly drop in the annual Consumer Price Index (CPI) rate since April 1992. The Bank of England (BoE) has kept interest rates unchanged at 5.25% and expects a challenging journey to bring inflation down to its 2% target by late 2025. Rishi Sunak acknowledged this as progress towards his goal of halving inflation within the year, bearing in mind the anticipated election in 2024. Chancellor Jeremy Hunt views this as a step toward long-term economic growth. Despite this positive trend, Britain still maintains the highest consumer price growth among G7 nations and has seen a 21% increase in consumer prices since late 2020. The BoE and economists anticipate further interest rate cuts by December 2024.

The Bank of England has declared that the base interest rate will remain at 5.25% for at least another six weeks. The bank’s governor, Andrew Bailey, emphasised that there is ‘no room for complacency’ regarding persistently high inflation, and cautioned against thinking about rate cuts too soon. He now anticipates slightly lower inflation for the rest of the year than previously projected. Critics argue that the bank has acted too cautiously, and that, with upcoming events like the general election and declining political popularity, inflation risks are on the rise. The shadow chancellor, Rachel Reeves, considers the Bank's forecasts a ‘damning indictment’ of economic failures by the Conservative Party, highlighting the need for alternative growth strategies.

On August 3rd, the Bank of England’s base rate rose again to 5.25%. The last time it was 5.25% was in 2008. The Bank expects inflation to fall below 5% in the final quarter of 2023, while the government pledges inflation will be 5% or below by 2024. The Bank's increase influences the cost of borrowing, making mortgages more expensive, while at the same time offering greater returns on savings accounts. The theory is that raising interest rates makes it more expensive to borrow money, so people have less to spend, reducing demand and inflation. Meanwhile, rising interest rates, higher energy costs and squeezed consumer spending have weighed on retailers with Wilko homewares now on the brink of collapse, putting 12,000 jobs at risk. They have filed a notice of intention to appoint administrators after failing to find enough emergency investment. Wilko has 400 UK stores. See

A Christian economist has urged churches to consider setting up benevolence funds to help members struggling with the cost of living as inflation proves more persistent than expected. Former IMF economist and government debt manager Dr Paul Mills said the step was needed for those on fixed incomes or losing their jobs. He was speaking after an economic advisor to the Chancellor said the Bank of England may need to spark a recession to finally get rising prices under control. The bank's target from the Government is to get inflation down to 2%, but the public has yet to see the pain that is coming through the economy from interest rate rises. On 22 June the base rate increased to 5%, a bigger increase than expected. Dr Mills said it would help to pray for the nation, and for medium- to long-term steps to turn things around.

The latest interest rate rise by the Bank of England means its benchmark interest rates have hit 3% for the first time since 2008. The interest rate affects mortgages, repayments on credit card debt and the interest paid on savings accounts. They have been rising since December in an effort to curb the rate at which the cost of everyday goods and services are rising. This latest rise follows economic turmoil under Liz Truss, though things have calmed slightly since Rishi Sunak took over and promised to issue a plan to repair the nation's finances later this month, but tax rises and spending cuts are expected. The Bank of England’s outlook for the UK economy is a downturn lasting for two years and the unemployment rate will nearly double.

The Bank of England has raised interest rates to 2.25%, the highest level for 14 years. This will make it more expensive to borrow, which should - theoretically - encourage people to borrow less and spend less. It should also spur people to save more. However, there is also a risk that it can drag on growth, harming the economy. The bank's monetary policy committee, which sets rates, believes that the economy is already shrinking, which would officially push the UK into recession. The Bank of England has also warned that the government’s energy price freeze will push up inflation in the medium term. With energy bills rising less sharply, households will have more money to spend on other goods and services (although some people are already having to skip meals due to rising bills).