Latest news with #MPC
South Wales Guardian
3 hours ago
- Business
- South Wales Guardian
UK interest rates kept on hold with Bank alert to ‘highly unpredictable' world
The Bank's Monetary Policy Committee (MPC) decided to keep rates unchanged at 4.25%. In a split vote, with six members opting to hold and three preferring to cut, the MPC said a 'gradual and careful approach' to reducing borrowing costs continued to be the right course of action. Bank governor Andrew Bailey said: 'Interest rates remain on a gradual downward path, although we've left them on hold today. 'The world is highly unpredictable.' He added that there were 'signs of softening in the labour market' – referring to indicators including slower hiring and wage growth easing – which were being closely watched to see how far they feed into UK inflation. The committee said it was alert to concerns about conflict in the Middle East, which has escalated in recent days with attacks between Israel and Iran. In the minutes of the MPC's meeting, it noted that there had been 'rapid geopolitical developments', adding: 'Energy prices had risen owing to an escalation of the conflict in the Middle East. 'The committee would remain vigilant about these developments and their potential impact on the UK economy.' It echoes similar remarks made by the US's central bank which also opted to keep interest rates on hold on Wednesday. Global oil and natural gas prices have surged in recent weeks, which threatens to push up energy costs in the UK. Furthermore, the MPC noted that Donald Trump's tariff policy was posing risks to global trade and continuing to create uncertainty. But it said that deals struck between the US and other countries, including the UK, meant that the direct impact of the 'trade shock' on global growth could be smaller than it had forecast last month. Meanwhile, the decision to keep rates on hold came as UK Consumer Price Index (CPI) inflation remained above the Bank's 2% target level, coming in at 3.4% last month. The jobs market was also starting to cool, with the rate of unemployment ticking up and pay growth starting to ease. The Bank said its network of agents had found that cost pressures from the beginning of April – including national insurance contributions rising – had put pressure on firms to recover them by raising prices. As well as price hikes, it noted that businesses had been leaning on other actions to mitigate costs, including reducing their workforce, staff hours, salaries, and absorbing into profits. The Monetary Policy Committee voted by a majority of 6-3 to keep interest rates at 4.25% Find out more: — Bank of England (@bankofengland) June 19, 2025 It also pointed to waning business sentiment amid weak growth in the UK economy, with demand not expected to recover until 2026. Signs of a weakening jobs market and economic growth indicates that a rate cut could be on the table when the committee next meets in August. Matt Swannell, chief economic adviser to the EY Item Club, said three MPC members voting for a cut was 'probably a sign that the MPC has become slightly more concerned about the labour market than it was in May'. 'This only raises the bar for the MPC to break from its cut-hold tempo at its August meeting and opens the door slightly to rate cuts potentially speeding up in the latter half of this year,' he said. Other experts pointed out that the Bank was having to weigh up a cooling labour market with growing pressures on inflation stemming from global developments. James Smith, developed market economist for ING, said some policymakers had a 'beady eye' on oil prices and were 'wary of a repeat of 2022, where a rise in energy prices turned into a much wider and more persistent services-driven inflation episode'. He is nonetheless forecasting a reduction in rates in August and again in November. Rachel Reeves said the Government respected the Bank's decision as she spoke at The Times CEO Summit. Speaking in central London, the Chancellor said: 'We respect independent economic institutions, and the Bank has got an incredibly important but difficult job to do. 'We want them to set the monetary policy that is appropriate for meeting the inflation target, because we also saw in the last parliament a double-digit inflation which was so challenging for businesses, but also family finances, which also has a knock on impact on business.' Ms Reeves, a former economist at the Bank, insisted the four interest rates cuts made under Labour were 'a world away from the previous parliament, when interest rates went up so sharply because of the poor economic mismanagement of prime ministers and chancellors'.
Yahoo
4 hours ago
- Business
- Yahoo
BoE leaves interest rates on hold at 4.25%
The Bank of England has left interest rates on hold at 4.25%. The Bank's Monetary Policy Committee (MPC) chaired by Bank Governor Andrew Bailey voted by 6 to 3 to leave the cost of borrowing unchanged in a blow to heavily indebted businesses and millions of mortgage borrowers. Three members of the MPC voted to cut rates to 4%. Rates were last cut to their current level in May. Today's decision had been widely expected in the City, particularly after it was revealed yesterday that the rate of inflation only fell slightly to 3.4% in May. However most analysts expect the Bank to make its next move in August with a further quarter point cut to 4% to help boost the UK's anaemic economic growth. That would be the fifth reduction since the Bank started easing interest rates from their peak of 5.25% in July last year. A further reduction to 3.75% is widely expected in November Rates were hiked rapidly by the Bank from December 2021 to August 2023 to get a grip of the rampant inflation unleashed by the ending of Covid restrictions and the energy price spike that followed the full scale Russian invasion of Ukraine. It left millions of homeowners who took out fixed two and five mortgage deals at record low interest rates between 2017 and 2021 facing hugely higher costs when they had to remortgage. Around 1.6 million mortgage deals are set to expire this year, according to trade body UK Finance. Suren Thiru, economics director at accounting body ICAEW , said: 'Keeping interest rates unchanged is a big blow to those people wrestling with high mortgage bills and firms struggling with April's host of major bill rises and tax hikes. 'Though this policy loosening cycle is not yet over, this latest decision is further confirmation that the speed of interest rate cuts remains especially cautious, with policymakers wary over elevated inflation and intensifying international instability. 'While just three MPC members voted to cut rates, an August policy loosening remains probable with the meeting minutes indicating continued concerns over the UK's vulnerability to growing economic and geopolitical headwinds. 'With policymakers facing a difficult combination of deepening global turbulence, uncomfortably high inflation and rising oil prices, future interest rate decisions will be more fraught, particularly if the economy weakens further.' Mark Harris, chief executive of mortgage broker SPF Private Clients, said: 'With only a two-way split in voting this time around - three members voted for a quarter-point reduction while six voted for a hold - this is encouraging, suggesting that another reduction could come at the August meeting. 'However, with the Bank opting for a cautious approach, it has missed a real opportunity to be bold by cutting rates again. This would have sent out a strong message, helping boost the housing market and wider economy, particularly now that the stamp duty concession is no longer available. Paul Noble, CEO of online lender Chetwood Bank, said: 'The MPC's lack of action piles on greater uncertainty for mortgages as well, leaving would-be buyers in the lurch. 'This cautious approach could lead to greater paralysis when what markets need is a catalyst. For savers, the risk is time – it's vital to find to best returns, to stay flexible, and to stop letting handwringing on Threadneedle Street dictate their outcome.' Error in retrieving data Sign in to access your portfolio Error in retrieving data
Bloomberg
6 hours ago
- Business
- Bloomberg
Julian Harris: No Publicity is Good Publicity for the BOE
The Bank of England did everything it could to avoid ruffling feathers this afternoon — and succeeded. At the time of writing, markets are pricing UK assets at eerily similar levels to where they were sitting prior to the Old Lady's midday decision to keep interest rates at 4.25%. That may seem unsurprising, given the widely-expected hold, but bear in mind that the boat could easily have been rocked by any of the following: the 6-3 vote split, the minutes of the Monetary Policy Committee's meeting, Governor Andrew Bailey's written statement, Bailey's social media clip, Bailey's obligatory letter to the chancellor, or even a brief TV appearance by Deputy Governor Clare Lombardelli. All of which were closely watched by traders hunting for any hint of a dovish or hawkish shift in sentiment.
Yahoo
6 hours ago
- Business
- Yahoo
Bank of England holds interest rates at 4.25% amid inflation fears
The Bank of England (BoE) has kept interest rates untouched at 4.25% amid geopolitical uncertainty and surging food and oil prices. Members of the Monetary Policy Committee (MPC) voted by 6-3 to keep borrowing costs on hold following their reduction announced in May. Three members — Swati Dhingra, Dave Ramsden and Alan Taylor — backed a quarter of a point cut to 4%. Dhingra and Taylor had backed a half a point reduction at the meeting in May. It means the Bank has voted to cut rates at every other meeting since it started easing borrowing costs last August, from a peak of 5.25%. The governor of the Bank of England Andrew Bailey said the world had become 'highly unpredictable' as interest rates were held at 4.25%. Read more: UK inflation slows to 3.4% in May as transport costs ease Bailey said: 'Interest rates remain on a gradual downward path, although we've left them on hold today. 'The world is highly unpredictable. In the UK we are seeing signs of softening in the labour market. 'We will be looking carefully at the extent to which those signs feed through to consumer price inflation.' The decision had been widely anticipated by markets, particularly following inflation data for May showing prices rising 3.4% — well above the Bank's 2% target. Investors and economists saw little chance of a rate cut, especially with tensions in the Middle East escalating and pushing oil prices higher. Traders bet there is an 84% chance that policymakers will cut from 4.25% to 4% at the next meeting. The chances stood at 77% on Wednesday. This would remain in line with the Bank's pattern of reducing rates at every other meeting since it started lowering from a peak of 5.25% last August. Vivek Paul, UK chief investment strategist at BlackRock Investment Institute, said:'The Bank's decision to hold firm today shows that, much like the weather, inflation is too hot to feel comfortable about cutting rates just yet. Services inflation showed signs of easing in yesterday's CPI print, but remains stubbornly high. Read more: FTSE 100 LIVE: Stocks slip as Bank of England holds interest rates "Among developed market central banks, the Bank of England still faces one of the toughest trade-offs between growth and inflation. Uncertainty remains around tariff impacts, and the recent escalation of tensions in the Middle East has added fresh uncertainty." Indeed, the Monetary Policy Committee (MPC), led by governor Bailey, was expected to maintain a cautious tone even before the outbreak of conflict between Israel and Iran sent oil prices soaring by 8.5% in less than a week. Zara Nokes, global market analyst at JPMorgan Asset Management, said UK inflation is still 'uncomfortably high'. "Escalating tensions in the Middle East, and the upward pressure this is putting on oil prices, will only add to the Bank of England's concern about easing rates too quickly," she said. "The Monetary Policy Committee will face a tougher choice when meeting again in August, given the combination of still-sticky inflation and evidence that the labour market is quite clearly cooling. A deterioration in the labour market should, in theory, put downward pressure on inflation, but until there are clear signs of this in the hard data, the Bank should be careful not to claim victory over inflation quite yet, not least because of the uncertain geopolitical climate.' Threadneedle Street admitted that the Middle East conflict is pushing up energy prices. "Energy prices have risen owing to an escalation of the conflict in the Middle East. The Committee will remain sensitive to heightened unpredictability in the economic and geopolitical environment, and will continue to update its assessment of risks to the economy," it said. Brad Holland, director of investment strategy at Nutmeg, said: 'It was always going to be an uphill battle for the Bank of England to justify a back-to-back rate cut following last month's decision to bring down rates. Services inflation and wage growth continue to run hot, and external factors such as tariffs and global conflict have created too many 'unknowns'. The Bank is showing caution. 'For now, the question weighing on many people's minds is: how long will it take for interest rates to fall further? It is believed by many that the 'neutral rate', where the UK economy can deliver price stability, lies around 3%. But, we could be a long way away from this target with the market currently expecting the base rate to fall to 3.5% by April 2026. Getting services inflation down to a more manageable level is crucial to lowering interest rates. 'Many expect the next rate cut to take place in the early autumn when trends in services prices will be clearer, and the impact of the international situation will be better understood. Arguably, the Bank of England is playing for time.' Read more: Number of million-pound homes for sale in Britain doubles since 2019 The UK economy contracted 0.3% in April, marking the sharpest monthly decline since 2023. Analysts cited the lingering effects of US president Donald Trump's trade tariffs and a temporary hit from the expiration of the stamp duty holiday. Lindsay James, investment strategist at Quilter, said: 'Events of recent weeks means all hopes of the BoE moving faster to cut interest rates have been extinguished. As such, it comes as very little surprise that the MPC has chosen to hold rates at 4.25%. Although we had three votes for a cut, ultimately inflation continues to drive decision making, and with the headline figure remaining elevated earlier this week, there is very little movement just now for the committee, and that is before global events are factored in. 'We are still awaiting the full impact of Donald Trump's tariffs to show up in the prices of goods. We are approaching the end of the 90-day pause on reciprocal tariffs, and what happens from there is really anyone's guess. Even with the US-UK trade deal, the raft of tariffs on other nations would likely be felt in some form here too. In particular, Europe looks the least likely to cave to Trump, and given it is the UK's biggest trading partner, there will be knock-on effects." The BoE said that underlying UK GDP growth "appears to have remained weak", and the labour market has "continued to loosen". It also warned that there was a "two-sided risk to inflation", as weak demand could pull it down, but higher food prices could send it higher. "Consumer price inflation is expected to remain broadly flat at current rates throughout the remainder of the year before falling back towards target next year," the BoE said. Despite four rate cuts over the past year, the BoE is proceeding cautiously after aggressive tightening through 2022 and 2023 to combat inflation. Markets currently expect two more 25 basis-point cuts by the end of 2025. Read more: Pound treads water as Bank of England holds interest rates Matthew Ryan, head of market strategy at Ebury, said: 'For now, we are sticking by our call for just two further cuts to the base rate between now and year-end, possibly in August and November, when the latest Monetary Policy Reports will be released. 'We don't believe that the MPC will entertain the idea of lowering rates more aggressively than that just yet." The Bank rate is a key reference point for borrowing and savings products across the UK, affecting everything from mortgage costs to interest on savings accounts. Kevin Mountford, co-founder of Raisin UK, warned of potential volatility in mortgage markets. 'This decision has wide implications for consumers. While Zoopla's House Price Index reported healthy housing sales in May, fixed rates look like they could become unsettled. Consumers looking to borrow should take advantage when they see a good option for them," he said. 'Any decision that has a financial impact for consumers, like buying a new home, is of course a big one and with a high cost of living showing little sign of ease, it can be easy to get stuck in the day to day. The current rates provide consumers with little reassurance but it is essential for people to take a step back and think about the bigger picture." Frances Haque, chief economist at Santander UK, said: 'Aspiring homeowners and those already on the ladder could expect to see mortgage rates continue to hover between the top end of the threes or lower end of the fours. For this to change significantly we'd need to see changes in economic data — and as ever, that could see mortgage rates go up as well as down. "While these may pose bumps in the road for buyers, the traditional increase in home moving we see during the summer will likely continue to drive demand for properties as we enter Q3 which, coupled with affordability improvements, means we expect the 2025 mortgage market will continue to grow.' Across the Atlantic, the US Federal Reserve opted to leave borrowing costs unchanged on Wednesday. The Fed left its outlook for interest rates this year unchanged, with its 'dot plot' indicating another two cuts. Seema Shah, of Principal Asset Management, said that decision was 'somewhat surprising'. She said: 'Any change in this year's dot plot would have been interpreted as a signal that the Fed has a clear plan about its future policy path, when actually the likely truth is that, with the economic outlook still very much shrouded in uncertainty, the Fed is unsure of how things will pan out.' However, some central banks are lowering borrowing costs. The Swiss National Bank (SNB) cut its interest rate to zero on Thursday in response to falling inflation and a stronger Swiss franc. The SNB reduced its policy rate from 0.25%, as had been expected by markets. Norway's central bank surprised markets today by announcing a quarter-point interest rate cut amid the 'uncertain' economic outlook. Norges Bank lowered borrowing costs from 4.5% to 4.25% — its first reduction in five years. Read more: Trending tickers: Alphabet, Amazon, Circle, Shell and Whitbread Bitcoin price steady above $105k as Trump mulls Iran strike Number of million-pound homes for sale in Britain doubles since 2019
Yahoo
8 hours ago
- Business
- Yahoo
Bank's rate decision leaves frustrated Reeves praying for an August cut
Last week's spending review revealed Rachel Reeves's plan for reviving the UK's struggling economy – but one of the most powerful levers for unleashing growth lies out of her reach, at the Bank of England. Thursday's no-change decision on interest rates from the Bank's nine-member monetary policy committee (MPC) was widely expected; but the chancellor and her colleagues will be fervently hoping for a cut in August, perhaps sooner – and more before the year is up. The Bank's governor, Andrew Bailey, had already warned the pace of rate cuts looked uncertain, as a result of Donald Trump's trade wars. The alarming prospect of a fresh conflict in the Middle East is likely to have made MPC members even more cautious. The minutes from Thursday's meeting suggested the MPC would 'remain sensitive to heightened unpredictability in the economic and geopolitical environment,' and would 'continue to update its assessment of risks to the economy'. Evidence of rising food prices in the latest inflation data is also likely to have preyed on their minds – driven in part by climactic challenges, including the poor harvests that triggered the largest annual increase in chocolate costs on record. Inflation is expected to remain around its current level of 3.4% for the rest of the year – well above the Bank's 2% target. Yet the minutes did also suggest the balance of opinion is shifting towards loosening policy, as the jobs market continues to slow down, helping to alleviate concerns about bumper wage deals driving up inflation. The MPC now expects the impact of Trump's tariffs to be less dramatic than at its last forecast in May, given various concessions and deals – though they stress that 'trade policy uncertainty would nevertheless continue to have an impact on the UK economy'. Dave Ramsden, deputy governor, voted for a quarter-point cut, to 4% – joining the external members Alan Taylor and Swati Dhingra, both of whom wanted a bigger-than-consensus half-point reduction in May. The paragraph of the minutes that set out their argument pointed to the fact that 'the cumulative evidence from a range of labour market data pointed to a material further loosening in labour market conditions'. Ramsden has previously been slightly ahead of the consensus in moving to cut – he was ready for rates to come down in May last year, three months before the eventual reduction in August; and wanted to see a cut in December, that didn't happen until February. The other two doves voted for a bumper half-point cut in May, so it is no surprise that they would have liked to have seen another reduction on Thursday. Dhingra told MPs on the Treasury select committee recently that she was becoming increasingly concerned about the risk that holding policy 'too tight' for an extended period – ie keeping rates high – risked undermining the economy's potential to grow. Bailey confirmed alongside Thursday's no-change decision that rates remained on a 'gradual downward path'. That appears to point to another quarter-point cut in August. Reeves will be hoping the MPC picks up the pace.
