Latest news with #MonetaryPolicyCommittee
Business Standard
3 hours ago
- Business
- Business Standard
GBPUSD reclaims $1.35 mark; Bank Of England stands pat on rates
The British pound extended sharp upside on Friday tracking mild weakness in dollar amid lack of activity as US markets were closed on June 19 in observance of Juneteenth. Meanwhile, Bank of England yesterday decided to keep interest rates unchanged after cutting it by a quarter-point last month. The Monetary Policy Committee voted 6-3 to hold the Bank Rate at 4.25%. Three members preferred to reduce the rate by 25 basis point. The central bank noted that there has been substantial disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations. This has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory so as to continue to squeeze out existing or emerging persistent inflationary pressures. For the day, investors await UK retail sales for May. Nevertheless, broad strength in dollar amid the ongoing Middle East turmoil could also limit gains the counter. GBPUSD is currently quoting higher by more than half a percent on the day at $1.3502. On the NSE, GBPINR futures are up 0.33% at 116.87.
South Wales Guardian
13 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'.
Associated Press
15 hours ago
- Business
- Associated Press
Bank of England says world is ‘highly unpredictable' as it keeps interest rate at 2-year low
LONDON (AP) — The Bank of England warned Thursday about the 'highly unpredictable' geopolitical environment as it kept its main interest rate unchanged at the two-year low of 4.25%. With concerns mounting over the conflict between Israel and Iran, and uncertainty over U.S. President Donald Trump's tariff agenda, rate-setters at the bank were widely expected to keep borrowing costs on hold as they await developments. However, the news that three of the nine policymakers on the Monetary Policy Committee voted to cut rates by a quarter of a percentage point has swelled market expectations that rates will be cut again in August. Minutes to the meeting showed that policymakers were mindful of how the conflict in the Middle East will impact on oil prices, which have risen sharply in recent days to over $75 a barrel. The prevailing view at the bank was that inflation, which currently stands at 3.4%, would remain high over the coming months but start to head back towards next year especially as unemployment has started to rise, a development that can keep a lid on wage demands and hence lower inflation. The uptick in oil prices has the potential to offset that. 'Interest rates remain on a gradual downward path, although we've left them on hold today,' bank governor Andrew Bailey said. 'The world is highly unpredictable.' Since its first quarter-point rate cut last August from the 16-year high of 5.25%, the Bank of England has played it steady, reducing interest rates every three months. That would mean the next reduction is in August. Economists believe that remains the most likely outcome but cautioned that geopolitical events could prompt a reassessment. 'Further escalation of the conflict in the Middle East could push up on U.K. inflation, which could see the Bank move more cautiously,' said Felix Feather, an economist at asset management firm Aberdeen. The cuts have come even though inflation has been above the bank's target rate of 2% for most of that time. Rate-setters can't do much about current inflation so set policy on a longer-term horizon, such as over two years. Uncertainty over the level of tariffs U.S. President Donald Trump will impose around the world is also clouding the outlook for prices around the world. Though the U.K. looks like it will be spared a raft of tariffs, the backdrop for the global economy remains highly uncertain. The tariff issue is at the forefront of concerns at the U.S. Federal Reserve, which on Wednesday kept its key rate unchanged, to the chagrin of Trump, who has been urging the central bank to join others, such as the Bank of England and European Central Bank, and cut borrowing costs.
The Independent
17 hours ago
- Business
- The Independent
Don't panic, chancellor – there's still hope for interest rate cuts
Of all the losers from the Bank of England 's decision to hold interest rates – which includes the 591,000 people currently on tracker mortgages, as well as those among the 7.1 million households on fixed rate mortgages who are scouting around for a new deal – the biggest loser of all could be one Rachel Reeves. The chancellor needs the British economy to start firing. Number 11 has very little headroom if it is to keep to Reeves' fiscal rules, which prohibit borrowing to fund day-to-day government spending, and avoid a tax-raising Budget in the autumn. Base rates at the current 4.25 per cent – described by the Bank as 'restrictive' – are throttling the growth that could ease the pressure, and provide some much needed assistance to businesses struggling under the weight of high financing costs, not to mention mortgage holders grappling with high costs. Three members of the rate-setting Monetary Policy Committee were sufficiently worried about the economy – and the prospect of inflation dipping below the Bank's 2 per cent target next year – to vote for an immediate cut. True, they were the usual suspects – dove-in-chief Swati Dhingra, an external MPC member, Alan Taylor, also an external member and the first Reeves appointment, and Dave Ramsden, one of the Bank's deputy governors. However, that all three of them combined to vote to defy market expectations and cut now, together with comments from governor Andrew Bailey after the decision was made public, have raised hopes that a cut could come in August. The City was previously betting on September as the more likely date. While even August may not come soon enough for Reeves, business groups would certainly cheer given the headaches created by higher taxes, rampant uncertainty and rising wages, especially at the bottom of the scale where those on the minimum wage have been granted a big raise. That is welcome. But we are starting to get to the level at which it's fair to at least debate how much further the floor can be raised before damaging the labour market and the wider economy, particularly given how shaky the latter currently is. Some companies have also clearly responded by squeezing those in roles that pay just above the minimum. The increase could thus be filed under the heading 'no good deed goes unpunished'. The unstable global picture, dominated by conflicts that look increasingly frightening, inevitably complicates the MPC's job. The outbreak of hostilities between Israel and Iran has already driven a sharp rise in the oil price, and a lesser, but still significant rise in natural gas prices. Pay close attention to the latter in particular, given the impact it could have on OfGem's next energy price cap, and the inflationary impact higher gas prices have caused in the past. Britain remains over-reliant on wholesale gas prices, a longstanding and vexatious problem that will not be fixed easily or quickly. The Bank said it was 'monitoring' the situation, but its rate-setters could easily find themselves caught between a rock and a hard place if the conflict damages the economy while also stoking inflation. Stagflation – a stalling economy, with high inflation and high interest rates – is the nightmare scenario. What really doesn't help matters is the unreliable data the Bank has been receiving from the Office for National Statistics (ONS), particularly the longstanding problems with its labour force survey. It also recently emerged that it got the April inflation number wrong. This represents a huge problem. If the labour market is weaker than the official numbers suggest, and wage settlements are lower, then there would be more scope to cut rates, to the economy's benefit. Recruitment firm Hays has seen its shares slump to a 14-year low as a result of a global slowdown in hiring, with its UK and Ireland division a notable weak sport. A 13 per cent decline in fees were forecast in the domestic market while the company expects a 9 per cent decline across the group as a whole. The ONS needs to fix its problems. It simply isn't good enough. As it is, the MPC is predicting a 'significant slowing' in wage settlements as a result of a looser jobs market, in which vacancies have been tumbling and unemployment rising: even though the MPC trotted out its usual line about taking a 'cautious' approach to cutting rates, while making clear that their path is not 'pre-determined', that is another hint that an August cut could be in the works. Immediate beneficiaries would be those looking to buy homes or remortgage their existing residences. Fixed-rated deals have risen recently because the markets reset their expectations of the pathway for rates. Another change in sentiment could improve deals again. Capital Economics, for one, thinks rates could fall to as low as 3.5 per cent, even with inflation not expected to move back towards the 2 per cent target until next year, with the current 3.4 per cent rate expected to peak at 37 per cent in September. If its forecasters are right about that, it could be just the ticket for the chancellor, the government, and the economy.
North Wales Chronicle
18 hours ago
- Business
- North Wales Chronicle
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'.
