Bank of England Archives

September 19, 2025September 19, 2025

Bank of England holds rates amid inflation concerns

On 18th September, the Bank of England voted 7–2 to keep interest rates steady at 4%, resisting calls for further easing amid persistent inflationary pressures.

The decision follows August’s 25 basis point cut and reflects caution over elevated wage growth and stagnant UK GDP.

Inflation held at 3.8% in August, nearly double the Bank’s 2% target. Policymakers signalled a ‘gradual and careful’ approach to future cuts, citing upside risks to medium-term inflation.

With economic growth flat and the jobs market cooling, analysts now expect the next rate cut to come in early 2026.

August 20, 2025September 12, 2025

UK statistical blind spots: The mounting failures of the UK’s ONS

The Office for National Statistics (ONS), once regarded as the bedrock of Britain’s economic data, is now facing a crisis of credibility.

A string of recent failings has exposed deep-rooted issues in the agency’s data collection, processing, and publication methods—raising alarm among economists, policymakers, and watchdogs alike.

The most visible setback came in August 2025, when the ONS abruptly delayed its monthly retail sales figures, citing the need for ‘further quality assurance’. This two-week postponement, while seemingly minor, is symptomatic of broader dysfunction.

Retail data is a key indicator of consumer confidence and spending, and its delay undermines timely decision-making across government and financial sectors.

But the problems run deeper. Labour market statistics—once a gold standard—have been plagued by collapsing response rates. The Labour Force Survey, a cornerstone of employment analysis, now garners responses from fewer than 20% of participants, down from 50% a decade ago.

This erosion has left institutions like the Bank of England flying blind on crucial metrics such as wage growth and economic inactivity.

Trade data and producer price indices have also suffered from delays and revisions, prompting the Office for Statistics Regulation (OSR) to demand a full overhaul.

In June, a review led by Sir Robert Devereux identified “deep-seated” structural issues within the ONS, calling for urgent modernisation.

The resignation of ONS chief Ian Diamond in May, citing health reasons, added further instability to an already beleaguered institution.

Critics argue that the failings are not merely technical but systemic. Funding constraints, outdated methodologies, and a culture resistant to reform have all contributed to the malaise.

As Dame Meg Hillier, chair of the Treasury Select Committee, reportedly warned: ‘Wrong decisions made by these institutions can mean constituents defaulting on mortgages or losing their livelihoods’.

Efforts are underway to replace the flawed Labour Force Survey with a new ‘Transformed Labour Market Survey’, but its rollout may not be completed until 2027.

Meanwhile, the ONS is attempting to integrate alternative data sources—such as VAT records and rental prices—to bolster its national accounts. Yet progress remains slow.

In an era where data drives policy, the failings of the ONS are more than bureaucratic hiccups—they are a threat to informed governance.

Without swift and transparent reform, Britain risks making economic decisions based on statistical guesswork.

August 20, 2025September 12, 2025

UK inflation rises to 3.8% in July 2025 amid summer travel surge

The UK’s annual inflation rate climbed to 3.8% in July, marking its highest level since January 2024 and outpacing economists’ forecasts of 3.7%.

The Office for National Statistics (ONS) attributed the unexpected rise to soaring airfares, elevated accommodation costs, and persistent food price pressures.

Transport costs were the primary driver, with airfares experiencing their steepest July increase since monthly tracking began in 2001.

Analysts suggest the timing of school holidays and a spike in demand—possibly amplified by high-profile events like the Oasis reunion tour—contributed to the surge.

Food inflation also continued its upward trend, with notable increases in coffee, fresh orange juice, meat, and chocolate.

The Retail Prices Index (RPI), which influences rail fare caps, rose to 4.8%, potentially signalling a 5.8% hike in regulated train fares next year.

Core inflation, which excludes volatile items such as energy and food, matched the headline rate at 3.8%, suggesting underlying price pressures remain stubborn.

Services inflation rose to 5%, reinforcing concerns that inflation may be embedding itself more deeply in the economy.

Despite the Bank of England’s recent rate cut to 4%, policymakers face a delicate balancing act. With inflation still nearly double the Bank’s 2% target, further monetary easing may be limited.

Chancellor Rachel Reeves acknowledged the challenge, stating that while progress has been made since the previous government’s double-digit inflation, ‘there’s more to do to ease the cost of living’.

Measures such as raising the minimum wage and expanding free school meals aim to cushion households from rising prices.

As inflation edges closer to a projected 4% peak in September 2025, the coming months will test both fiscal and monetary resilience.

Can we trust the data coming from the ONS?

See report here.

August 8, 2025September 12, 2025

Bank of England cuts interest rates to 4% amid economic uncertainty and high inflation

On 7th August 2025, the Bank of England’s Monetary Policy Committee voted narrowly—5 to 4—in favour of reducing the base interest rate by 0.25% to 4%, marking its lowest level since March 2023.

This is the fifth rate cut in a year, aimed at stimulating growth amid sluggish GDP and persistent inflation, which currently stands at 3.6%.

Governor Andrew Bailey reportedly described the decision as part of a ‘gradual and careful’ easing strategy, balancing inflation risks with signs of a softening labour market.

While some committee members reportedly advocated for a larger cut, others urged caution, reflecting deep divisions over the UK’s economic trajectory.

The move is expected to ease borrowing costs for homeowners and businesses, with tracker mortgage rates falling immediately. However, savers will be losing out as rates continue to drop.

However, analysts warn that future cuts may hinge on upcoming fiscal decisions and inflation data, leaving the path forward uncertain.

Inflation is yet to be fully tamed.

July 17, 2025September 12, 2025

UK jobs market slows as unemployment rises

The UK jobs market continued to lose momentum, with fresh data from the Office for National Statistics highlighting a notable slowdown.

Unemployment has climbed to 4.7%, reaching its highest level in four years, while job vacancies fell for a third consecutive year to 727,000—the lowest in a decade, excluding the pandemic dip.

Pay growth also eased, with average annual wage increases slowing to 5% in the March–May 2025 period.

Economists suggest the Bank of England may consider an interest rate cut next month to support employment, although rising inflation remains a complicating factor.

Firms appear hesitant to hire or replace staff, signalling broader economic uncertainty. While the ONS has urged caution around the collection of unemployment data, the trend points to mounting pressure in the UK’s jobs landscape.

July 16, 2025September 12, 2025

UK inflation unexpectedly climbs to 3.6% in June 2025

The latest UK inflation figure of 3.6% is a setback for those hoping for a steady decline, especially after May’s 3.4%.

With core inflation and food prices also climbing, it’s a sign that underlying price pressures remain stubborn.

It further complicates the Bank of England’s path towards interest rate cuts and dents optimism for faster economic relief.

Summary

📈 Headline CPI: Increased to 3.6%, up from 3.4% in May 2024

🔍 Core inflation (excluding food, energy, alcohol, and tobacco): Rose to 3.7%, from 3.5%

🛒 Food inflation: Climbed to 4.5%, its highest level in over a year

⛽ Motor fuel prices: Were the largest contributor to the monthly rise

📊 Monthly CPI change: Up 0.3%, compared to 0.2% the previous month

This hotter-than-expected reading has sparked debate over the Bank of England’s next move.

While a rate cut in August 2025 is still widely anticipated, the inflation uptick may prompt a more cautious approach thereafter.

June 19, 2025September 12, 2025

Bank of England holds UK interest rate at 4.25%

The Bank of England held its base interest rate steady at 4.25% on Thursday 19th June 2025, with a 6–3 vote from the Monetary Policy Committee (MPC).

Three members pushed for a 0.25% cut, but the majority opted for caution amid persistent inflation and global uncertainty.

Inflation ticked up slightly to 3.4% in May, driven by regulated prices and earlier energy cost increases.

While wage growth is easing and the labour market is loosening, the Bank signalled it’s not ready to ease policy further just yet

May 21, 2025September 12, 2025

UK inflation hits 3.5% in April 2025 as household bills surge

UK inflation rose to 3.5% in April 2025, exceeding expectations and placing further financial strain on households.

The increase, reported by the Office for National Statistics, was driven by higher energy costs, water bills, and taxation pressures on businesses.

One of the most striking factors behind the surge was the 26.1% increase in water and sewerage costs, the largest recorded jump since 1988.

This, combined with electricity and gas prices, contributed to the unexpected rise in inflation. Meanwhile, falling fuel prices and clothing discounts helped mitigate some of the upward pressure.

The Bank of England, which had forecasted inflation at 3.4%, may now reconsider its approach to interest rates. A sustained period of inflation over 3% could delay potential rate cuts, impacting mortgage rates and borrowing costs.

Despite concerns, economists believe inflation should gradually ease in the coming months. However, persistent cost pressures on household essentials mean many families will continue to feel the squeeze.

The Bank of England will be closely monitoring economic trends before making further financial decisions.

With inflation unexpectedly climbing, individuals may need to rethink their budgets, spending habits, and savings strategies for the months ahead.

May 9, 2025September 12, 2025

Bank of England cuts interest rates by 0.25% to 4.25%

The Bank of England has cut interest rates by 25 basis points to 4.25% on 8th May 2025 marking its fourth reduction since August 2023.

The decision, backed by a majority of the Monetary Policy Committee, reflects easing inflation pressures and a need to support economic growth.

Inflation, currently at 2.6%, is expected to rise temporarily to 3.5% due to household bill increases.

The cut will provide relief to homeowners and businesses facing high borrowing costs.

However, policymakers remain cautious, balancing growth stimulation with inflation control. Markets anticipate further cuts, potentially bringing rates down to 3.25% by year-end.

April 16, 2025September 12, 2025

UK economy shows welcome signs of resilience with positive GDP growth and inflation relief

The UK economy displayed unexpected resilience in February 2025, with GDP growing by 0.5%.

This figure has exceeded market expectations and provided a welcome boost to UK economic confidence. The growth was fueled by robust activity in the services and manufacturing sectors, which helped counterbalance ongoing challenges in other areas.

February’s performance marks a recovery from the flat growth seen in January 2025, underscoring the adaptive capacity of businesses and consumers alike.

Adding to the positive momentum, the Consumer Prices Index (CPI) inflation rate eased to 2.6% in March 2025, down from February’s 2.8%.

The decline in inflation reflects a combination of factors, including falling fuel costs and stable food prices, which have alleviated pressure on household budgets.

This marks the lowest inflation level since late 2024 and aligns with the Bank of England’s goal of achieving price stability.

The interplay of stronger-than-expected GDP growth and easing inflation suggests a cautiously optimistic outlook for the UK economy.

While challenges persist, such as global economic uncertainties and lingering effects of Brexit, these latest figures indicate a potential turning point, despite the Chancellors autumn and spring ‘budgets’.

The UK government and market participants will be watching closely to see if this positive trend continues into the coming months.

See: Office for National Statistics (ONS)

March 21, 2025September 12, 2025

Bank of England holds interest rate at 4.5%

The Bank of England (BoE) has decided to maintain its base interest rate at 4.5%, following its latest Monetary Policy Committee (MPC) meeting

The Bank of England has warned economic and global trade uncertainty has ‘intensified’ as it held UK interest rates at 4.5%.

This decision, supported by eight out of nine committee members, reflects the Bank’s cautious approach amidst ongoing economic challenges.

The move comes as inflation remains above the Bank’s 2% target, with the UK Consumer Prices Index (CPI) inflation recorded at 3% in January 2025. Rising energy costs, water bills, and transportation fares have contributed to the persistent inflationary pressures.

Despite these challenges, the UK economy has shown mixed signals, with a slight GDP growth of 0.1% in the final quarter of 2024, followed by a contraction of 0.1% in January 2025.

The BoE’s decision to hold rates steady aims to balance the need to control inflation while supporting economic stability. Governor Andrew Bailey reportedly emphasised the importance of monitoring both global and domestic economic developments closely (that’s useful then – what a good idea).

The MPC’s cautious stance reflects concerns over global trade uncertainties and the potential impact of geopolitical tensions.

While the decision provides some relief to borrowers, it leaves savers and businesses navigating a landscape of economic uncertainty.

Analysts predict that the Bank of England may consider rate cuts later in the year, depending on inflation trends and economic performance.

For now, however, the focus remains on maintaining stability in a forever fast challenging environment.

February 19, 2025September 12, 2025

UK inflation higher-than-expected at 3% in January 2025

UK inflation rose sharply in January 2025 after airfares failed to fall by as much as usual and private school fees jumped.

The higher-than-expected inflation increase to 3% in the year to January 2025, from 2.5% in December 2024, means that consumer prices rose at the fastest rate for 10 months.

Why?

The U.K.’s inflation rate rose sharply to 3% in January, coming in above analyst expectations of a 2.8% reading, according to data released by the Office for National Statistics (ONS) on Wednesday 19th February 2025.

Core inflation, which excludes more volatile items such as energy, food, alcohol and tobacco prices, rose by 3.7% in the 12 months to January 2025, which was up from 3.2% in the previous month.

The ONS reported Wednesday 19th February 2025 that the largest upward contribution to the monthly change in the CPI came from transport and food and non-alcoholic beverages.

Interest rate reductions will likely pause on this news.

I wonder what spin the UK chancellor add.

Not good!

February 13, 2025September 12, 2025

EEK! Only 0.1% growth for the UK

The U.K. economy grew by just 0.1% in the fourth quarter according to a preliminary estimate from the U.K.’s Office for National Statistics (ONS) released Thursday 13th February 2025.

Economists had expected the country’s GDP to contract by 0.1% over the period.

The services and construction sectors contributed to the better-than-expected performance in the economy, up 0.2% and 0.5% respectively, but production fell by 0.8%, according to the ONS.

Sluggish growth

The UK economy recorded zero growth in the third quarter, accompanied by lacklustre monthly GDP. There was a 0.1% contraction in October 2024 followed by a 0.1% expansion in November 2024.

On Thursday 13th February 2025, the ONS that growth had picked up in December, with an estimated 0.4% month-on-month expansion attributed to growth in and production.

Sluggish and a recent decline in inflation prompted the Bank of England to implement its interest rate cut of the year last week, reducing the benchmark rate to 4.5%.

The central bank indicated that additional rate cuts are anticipated as inflationary pressures diminish. However, it noted that higher energy costs and regulated price changes are projected to increase headline inflation to 3.7% in the third quarter of 2025.

Pressure

The expectation is that UK underlying inflationary pressures will continue to decline. The Bank of England expects the inflation rate to return to its 2% target by 2027.

The bank also halved the U.K.’s economic growth forecast from 1.5% to 0.75% this year.

Poor economic performance will add additional pressure on U.K. Chancellor Rachel Reeves, whose fiscal plans have been criticised for increasing the tax burden on businesses.

Critics say the plans, which increase the amount that employers pay out in National Insurance (NI) contributions as well as a hike to the national minimum wage, could harm investment, jobs and growth. This appears to be coming to fruition.

Chancellor Reeves defended her ‘dire’ Autumn Budget reportedly saying the £40 billion of tax rises were needed to fund public spending and that she is prioritising economic growth.

A poor start – 0.1% is an anaemic growth percentage!

February 6, 2025September 12, 2025

Bank of England cuts interest rate to 4.50% and cuts growth forecast for 2025

The Bank of England has halved its growth forecast for 2025 as it cut interest rates to 4.50% – the lowest for around 18 months

The economy is now expected to grow by 0.75% in 2025, the Bank of England reportedly said, down from its previous estimate of 1.5%.

Not good news for the chancellor, Rachel Reeves.

Bank of England cuts interest rates to 4.5% amid economic slowdown

The Bank of England announced a reduction in its benchmark interest rate from 4.75% to 4.5%, marking the third cut since August 2024.

This decision comes as a response to the ongoing economic challenges facing the UK, including sluggish growth and concerns about the potential effect of Trump’s tariffs.

The primary reason behind this rate cut is the Bank’s effort to stimulate economic activity by making borrowing cheaper.

With the cost of borrowing now at its lowest level since June 2023, homeowners with variable rate or tracker mortgages will see immediate relief, with monthly repayments expected to decrease by approximately £29 per month on an average mortgage.

Small businesses, which have been struggling under heavy borrowing burdens, are also expected to benefit from this move.

Growth concerns linger

The Bank’s decision follows a series of disappointing economic indicators. The latest GDP figures showed that the economy only grew by 0.1% in November 2024, falling short of economists’ forecasts.

This sluggish growth, coupled with two months of falling output, has led the Bank to revise its growth forecast for 2025 downward.

The Bank now anticipates no growth during the fourth quarter of the year, and some economists are predicting as many as six rate cuts this year, potentially bringing the rate down to 3.25%.

While the rate cut is expected to provide some relief to borrowers, it also raises concerns about the long-term impact on savings and investment. With interest rates at historic lows, savers may find it challenging to earn meaningful returns on their deposits.

Additionally, the low-interest rate environment could encourage excessive borrowing and lead to asset bubbles, posing risks to financial stability. Has inflation finished?

The Bank of England’s decision to cut interest rates to 4.50% is a strategic move aimed at boosting economic activity and providing relief to businesses and homeowners.

January 22, 2025September 12, 2025

UK FTSE 100 back in favour as it breaks new highs!

The FTSE 100, the UK’s premier stock market index, has recently reached unprecedented new highs, marking a significant milestone in the UK financial world.

On 20th January 2025, the FTSE 100 closed at a record high of 8,548, surpassing the 8,500 barrier for the first time.

This achievement is a testament to the resilience and strength of the UK’s largest companies, even amid global economic uncertainties.

Several factors have contributed to this remarkable performance. Firstly, the anticipation of potential interest rate cuts by the Bank of England has fueled investor optimism. Lower interest rates typically reduce borrowing costs for companies, encouraging investment and expansion, which in turn boosts stock prices.

Additionally, the recent rise in oil prices has significantly benefited major oil companies like BP and Shell, which are key components of the FTSE 100.

FTSE 100 reaching new highs – one month chart as of 22nd January 2025 (08:21)

The banking sector has also played a crucial role in driving the index higher. With full-year earnings reports expected soon strong performance from banks could further propel the FTSE 100.

Furthermore, the index’s composition, which includes a substantial number of companies with global operations, has allowed it to benefit from the weaker pound. A weaker pound makes UK exports more competitive and increases the value of overseas earnings when converted back to sterling.

Market analysts are now speculating whether the FTSE 100 could reach the 9,000 mark in the coming months. While this would represent a significant rise from current levels, it is not entirely out of reach given the current momentum and favorable economic conditions.

However, some caution that the index’s rapid ascent may be followed by periods of volatility, especially as global economic conditions evolve.

In conclusion, the FTSE 100’s recent surge to new highs is a reflection of the robust performance of its constituent companies and the broader economic environment.

As investors continue to navigate the complexities of the global market, the FTSE 100 remains a key barometer of the health and vitality of the UK economy.

December 23, 2024September 12, 2025

UK economy had zero growth between July and September 2024 – bad to worse

Revised official figures indicate that the UK economy was weaker than initially estimated between July and September 2024. The economy experienced zero growth in these three months, down from an earlier estimate of 0.1%.

UK Chancellor, Rachel Reeves reportedly stated that the challenge to fix the economy “after 15 years of neglect is huge,” and October’s Budget would “deliver sustainable long-term growth, putting more money in people’s pockets.”

However, one of the UK’s leading business groups, the CBI, said its latest company survey suggested “the economy is headed for the worst of all worlds.”

The downward revisions will be a setback for Labour, which has prioritised boosting economic growth. It has promised to deliver the highest sustained economic growth in the G7 group of wealthy nations.

Separate figures released last week showed that inflation, the rate at which prices increase over time, is rising again at its fastest pace since March 2024. But it is close to the Bank of England target of 2%

The Bank of England voted to hold interest rates at the last meeting, stating that it believed the UK economy had performed worse than expected, with no growth between October and December 2024.

Businesses have warned that measures announced in October’s Budget, including a rise in employer national insurance and a higher minimum wage, could force them to raise prices and reduce the number new jobs.

December 18, 2024September 12, 2025

UK inflation rate rises to 2.6% to hit highest level since March 2024

The UK inflation rate has gone up for the second month in a row, rising at the fastest pace since March 2024. The UK inflation rate rose to 2.6% in the year to November 2024, according to official figures.

However, the rise was predicted by economists and was apparently within the range of the expected increase anticipated.

Fuel and clothing were significant contributors to the increase. Additionally, rising ticket prices for concerts and theatrical performances played a role according to data from the Office for National Statistics (ONS).

The Bank of England raises interest rates to maintain inflation at its target of %. The next rate decision is on Thursday 19th December 2024 and economists anticipate that rates will remain at 4.75%.

Prices for food and non-alcoholic drinks, alcohol and tobacco, and footwear all rose at a faster pace last month.

A wider measure of inflation showed housing and household services costs, including rent, rose by 3.5%.

UK inflation 2016 – 2024

November 7, 2024September 12, 2025

Bank of England lowers UK interest rate by 0.25% to 4.75%

The Bank of England cut interest rates by 0.25% Thursday 7th November 2024, even as Labour’s budget announcement confuses the outlook for future policy easing.

The anticipated reduction, marking the central bank’s second this year, lowers the key rate to 4.75%.

Financial markets had forecast a high probability of the quarter-point decrease at the November 2024 meeting, although analysts cautioned that future cuts might be postponed due to the Labour government’s tax-and-spend budget.

Investors are now awaiting remarks from Governor Andrew Bailey and his team regarding their updated economic forecast following the budget and the U.S. presidential election.

October 16, 2024September 12, 2025

UK inflation in surprise fall to 1.7%

UK inflation fell unexpectedly to 1.7% in the year to September 2024, the lowest rate in three-and-a-half years

This indicates that inflation, which is the rate at which prices increase over time, is currently below the Bank of England’s target of 2%, potentially leading to further reductions in interest rates next month.

The Office for National Statistics (ONS) reported that petrol and diesel prices saw a notable decrease, falling by 10.4% in September 2024compared to the same month the previous year.

Additionally, the cost of fares for domestic, European, and long-haul flights contributed to the lower inflation rate. While fares typically decrease after the summer peak, this year they have reduced more than usual.

UK interest rate at 1.7% below the Bank of England target of 2%

With inflation dropping below economists’ expectations, the markets are anticipating a cut in interest rates at the Bank of England’s upcoming meeting in November 2024. The present rate stands at 5%, and a reduction of 0.25% is now deemed highly probable.

August 14, 2024September 12, 2025

UK inflation rate climbs to 2.2%

The UK’s inflation rate has risen for the first time this year, official ONS figures show.

This indicates that overall prices increased by 2.2% in the year leading up to July, a rise from 2% in June, surpassing the Bank of England’s target.

The anticipated increase is primarily attributed to the less significant drop in gas and electricity prices compared to the previous year.

The Bank of England reportedly anticipates a further increase in inflation this year before it declines again.

The core inflation rate, which is the Consumer Price Index (CPI) excluding food, energy, alcohol, and tobacco prices, was reported at 3.3% in July, a slight decrease from 3.5% in June, according to the statistics office.

Additionally, service inflation, which the Bank of England (BoE) monitors closely, decreased to 5.2% in July from 5.7% the previous month, yet still remains elevated.

These inflation statistics follow the release of data on Tuesday 13th July 2024, which revealed that the average wage growth excluding bonuses was 5.4% from April to June year-on-year, the lowest in two years.

Concurrently, the unemployment rate dropped to 4.2% during this period, down from 4.4% between March and May 2024.

August 1, 2024September 12, 2025

Bank of England cuts rate to 5.0% – the first since the Covid pandemic of March 2020 and from the highest rate for 16 years

The Bank of England (BoE) on Thursday 1st August 2024 announced its first-interest rate reduction in more than four years, taking the key rate to 5%.

Although numerous analysts predicted that the Bank of England might announce a reduction in interest rates at its August 2024 meeting, the absence of definitive signals from the central bank left the decision clouded in uncertainty.

The Monetary Policy Committee (MPC) ultimately cast a 5-4 vote in favour of the reduction, with Governor Andrew Bailey stating that the committee would proceed with caution.

June 20, 2024September 12, 2025

“I’ve been saving this for a rainy day, Mr. Sunak – but I think you might need it now.”

Bank of England offers no election help to Rishi Sunak as the UK interest rate is held at 5.25%. Not that they should.

But the UK inflation is on target now at 2% so that’s some consolation. The PM claimed credit as the inflation target was met – happily informing us that his plan was working. But isn’t it the job of the Bank of England to maintain inflation at 2%?

Not that they have done a very good job of that either.

Soggy wet politics!

June 20, 2024September 12, 2025

No change as Bank of England holds interest rate at 5.25%

UK interest rates have been left unchanged at 5.25% by the Bank of England (BoE)

The Bank has maintained the interest rates at 5.25% for the seventh consecutive time to combat inflation, resulting in increased mortgage repayments and higher savings rates.

The interest rates, at their peak for the past 16 years, have been sustained at 5.25%. Currently, there are indications of a shift in stance, with a growing consensus for a potential reduction in August 2024.

UK interest rate and inflation chart June 2021 – June 2024

June 19, 2024September 12, 2025

UK hits 2% Bank of England’s inflation target for the first time since 2021

Inflation has reached the Bank of England’s target for the first time in nearly three years, having soared to 11.1% in October 2022, the highest in over four decades – driven by a spike in energy and food prices following the pandemic and Russia’s invasion of Ukraine.

In the year leading up to May 2024, prices increased by 2%, a decrease from the 2.3% rise in the previous month, according to official statistics.

The economy remains a central issue in the lead-up to the general election on July 4th, with all major parties discussing strategies to manage the cost of living.

This discussion precedes the Bank of England’s upcoming decision on UK interest rates this due on 20th June 2024.

The bank is anticipated to maintain the rate at 5.25% – a peak not seen in 16 years – for the seventh consecutive meeting, with the market not expecting a reduction until August 2024.

The decline in May’s inflation rate was attributed to slower price increases for food and soft drinks, recreation and culture, and furniture and household items.

Fuel pump prices remain high.

The inflation target has been achieved – it must be time for a reduction in interest rates.

June 5, 2024September 12, 2025

Banknotes with King Charles III enter circulation for the first time

Banknotes featuring a portrait of King Charles III entered circulation on Wednesday 5th June 2024.

Charles’s portrait will be featured on the front of the £5, £10, £20, and £50 banknotes, visible through the notes’ transparent security window. He is only the second monarch to appear on British banknotes, following Queen Elizabeth II.

Currently, there are more than 4.6 billion Bank of England notes in circulation, with a combined value of around £82 billion.

Bank of England

May 28, 2024September 12, 2025

IMF recommends UK interest rates should be cut to 3.5% by end of 2025

The International Monetary Fund (IMF) advises that the Bank of England should contemplate reducing its interest rates to 3.5% by the end of 2025.

This suggestion is made as the UK’s economy steadily recovers from the recession caused by the pandemic, while policymakers are dealing with inflationary challenges.

The ‘thinking’ behind the recommendation

Economic Recovery and Inflation Outlook

The IMF’s recommendation is grounded in its assessment of the UK’s economic trajectory.

Growth Forecast

The International Monetary Fund has upgraded its growth forecast for the UK in 2024, signaling a positive outlook. It anticipates growth of 0.7% this year and 1.5% in 2025.

Inflation

The IMF anticipates that UK inflation will decline to near the Bank of England’s target of 2% and stabilise at this rate in early 2025, indicating that inflationary pressures are within manageable limits.

Soft Landing

The UK economy is said to be approaching a ‘soft landing‘ following the mild recession of the previous year. Policymakers are focused on finding a balance between fostering growth and managing inflation.

Monetary Policy Considerations

The Bank of England’s Monetary Policy Committee (MPC) has been closely monitoring economic indicators and inflation trends. Here’s why the IMF’s recommendation matters:

Interest Rate Peaks

The Monetary Policy Committee has indicated that interest rates might have reached their peak. The current restrictive monetary policy is having an impact on the actual economy and the dynamics of inflation.

Market Expectations

Analysts anticipate the first interest rate cut by September 2024 at the latest. Market expectations align with this projection, with the base interest rate likely to be lowered to 4% by the end of 2025.

Balancing Act

Policymakers face the delicate task of supporting economic recovery while preventing runaway inflation. The IMF’s suggestion aims to strike this balance.

Implications for Borrowers and Savers

Mortgage Holders

Variable Rate Mortgages

If you have a variable rate mortgage, a rate cut could reduce your monthly payments. However, keep an eye on your lender’s response to any rate changes.

Fixed Rate Mortgages

Fixed-rate borrowers won’t immediately benefit from rate cuts, but they should still monitor the situation. If rates continue to fall, refinancing might become attractive.

Savers

Savings Accounts

Lower interest rates typically lead to diminished returns on savings accounts. It may be wise to diversify your investments to seek potentially higher yields in other areas.

Fixed-Term Deposit

Current fixed-term deposits will remain unaffected; however, new deposits might generate lower yields. It is advisable to carefully assess your alternatives.

Conclusion

The IMF’s recommendation highlights the intricate balance between fostering economic recovery and managing inflation. As the Bank of England considers its next steps, it is crucial for borrowers and savers to remain informed and adjust their financial strategies as needed.

For homeowners, investors, and savers alike, grasping the potential consequences of rate cuts is key to making well-informed choices in an ever-changing economic environment.

Disclaimer: The information provided here is based on current projections and should not be considered financial advice. It is not given as financial advice – it is for discussion and analysis only!

Consult a professional advisor for personalised recommendations.

Remember – always do your careful research first!

RESEARCH! RESEARCH! RESEARCH!

Update

The Bank of England has given its strongest hint yet that interest rates could be cut this summer. This comment was observed in a recent speech given by the deputy governor of the Bank of England.