Interest Rates Archives - Page 2 of 3

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 13, 2024September 12, 2025

Nasdaq and S&P 500 hit new all-time highs as Fed feeds scraps to the AI frenzy!

The S&P 500 soared to a new high, surpassing 5400 for the first time on Wednesday 12 June 2024, following the Federal Reserve’s latest policy statement and the May 2024 inflation report, which suggested a softening of inflationary pressures.

The S&P 500 index rose by 0.85%, closing at around 5421 while the Nasdaq Composite advanced 1.53%, finishing at 17608.

Both the S&P 500 and Nasdaq reached unprecedented levels and set closing records on Wednesday 12th June 2024. Conversely, the Dow Jones Industrial Average marginally declined by 0.09%, or around 35 points, to settle at 38712.

S&P 500 at new all-time high 12th June 2024

Nasdaq Composite at new all-time high 12th June 2024

The Federal Reserve maintained the interest rates, aligning with widespread expectations. The Fed also acknowledged some progress on inflation. Modest further progress has been made toward the Committee’s 2% inflation goal and this was more than enough coupled with the recent jobs report to push U.S. markets even higher.

A tiny glimpse of the ‘2% inflation future’ was all it took to send markets on an AI led feeding frenzy to push the S&P 500 and Nasdaq to new all-time highs.

One caveat though, the Fed’s recent forecasts predict only one rate reduction this year, a decrease from the three rate cuts anticipated earlier in 2024.

It was enough to propel markets to fresh all-time highs!

June 7, 2024September 12, 2025

U.S. job gains reached 272,000 in May 2024 – exceeding expectations of 190,000

The U.S. economy exceeded job growth expectations in May 2024, alleviating concerns of a labour market downturn but potentially diminishing the Federal Reserve’s motivation to cut interest rates.

Non-farm payrolls surged by 272,000 for the month – a significant increase from April’s 165,000 and surpassing the consensus forecast of 190,000.

Concurrently, the unemployment rate increased to 4%, marking the first instance it has reached this level since January 2022.

June 6, 2024September 12, 2025

European Central Bank (ECB) cuts interest rate by 0.25% to 3.75%

On Thursday, 6th June 2024, the European Central Bank announced a reduction in interest rates, a move that was widely expected, despite persistent inflationary pressures in the eurozone, which comprises 20 nations.

The central bank’s primary rate has been lowered to 3.75%, a decrease from the historic high of 4% where it has remained since September 2023.

The money markets had completely anticipated the 0.25% reduction at the June meeting. This marks the first decrease since September 2019, when the deposit rate was below zero.

May 31, 2024September 12, 2025

Euro zone inflation rises to 2.6% in May 2024

Eurozone inflation increased to 2.6% in May 2024, according to Eurostat’s announcement on Friday 31st May 2024.

Analysts had anticipated a 0.1% rise from the 2.4% headline figure reported in April 2024.

Core inflation, which omits the unstable effects of energy, food, alcohol, and tobacco, rose to 2.9% from April’s 2.7%. Contrary to the flat reading projected by economists.

A deviation from the expected 0.25% cut at the ECB’s June 2024 meeting would significantly surprise the markets, given the strong signals from policymakers in recent weeks.

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.

May 22, 2024September 12, 2025

UK headline inflation rate falls to lowest in three years but comes in hotter than expected

The April inflation came in higher than anticipated, falling to 2.3%, as reported by the Office for National Statistics on Wednesday 22nd May 2024.

Traders have now reduced their expectations of a June interest rate cut by the Bank of England (BoE). Markets reacted negatively in early trading.

The headline inflation rate decreased from 3.2% in March, marking the first instance since July 2021 that inflation has fallen below 3%, nearing the Bank of England’s target of 2%.

Contrary to the predictions of economists surveyed by Reuters, who expected a more significant drop to 2.1%, services inflation – a critical indicator monitored by the BOE due to its significance in the UK economy and as a gauge of domestically generated price increases – only fell marginally to 5.9% from 6%, missing the anticipated 5.5% from the BOE.

Core inflation, which excludes energy, food, alcohol, and tobacco, decreased to 3.9% in April from 4.2% in March.

The substantial decline in the headline rate was largely anticipated due to the year-on-year decrease in energy prices. However, investors shifted their attention to core and services inflation following indications from BOE policymakers of a potential interest rate cut later in the summer, contingent on new data.

After the data release, the market-makers probability of a June rate cut plummeted to 15% from 50% and the chance of an August cut also fell to 40% from 70%.

Lingering concerns over underlying inflationary pressures mean a June rate cut is unlikely. However, these figures may convince more rate setters to vote to ease policy, providing a signal that a summer rate cut is still a possibility.

May 16, 2024September 12, 2025

Dow, S&P 500 and Nasdaq Composite all hit new highs as favourable data allows potential rate cuts to get ever closer – September 2024 looks likely

All three major indices closed at records on 15th May 2024

The Dow climbed 0.88%, while the S&P 500 gained 1.17%, ending the session above 5,300 for the first time. The tech-related Nasdaq Composite closed higher by 1.40%.

Dow closed at a new high of: 39908

S&P 500 closed at a new high of: 5308

Nasdaq Composite closed at a new high of: 39908

May 9, 2024September 12, 2025

UK interest rate held at a 16-year high as Bank of England holds rates at 5.25%

The decision comes as inflation, which measures price rises over a period of time, remains above the Bank’s 2% target at 3.2%. But bank says cuts are coming.

Is the 2% target still a sensible benchmark?

The 2% inflation target set by central banks has been a widely adopted benchmark for monetary policy.

History

The 2% inflation target became prominent in the 1990s and early 2000s. Central banks, such as the Federal Reserve and the Bank of England, have aimed to maintain inflation at this level.

The Federal Reserve has typically pursued an inflation rate of about 2% since 1996.

In January 2012, then-Fed Chairman Ben Bernanke formally established the 2% target, and subsequent Fed chairs have continued to endorse this rate as the preferred level of inflation.

Why the 2% target?

Price stability

The 2% inflation target was selected as it provides a balance between preventing problematic inflation and avoiding damaging deflation. Does it work?

Avoiding deflation

Deflation, characterized by falling prices, can hinder economic growth. Central banks target a 2% inflation rate to avert deflation and ensure stability.

Creditor-Debtor compromise

The 2% inflation target represents a balance between creditors’ preference for lower inflation and debtors’ inclination towards higher inflation.

Challenges

Changing economic environment

In recent years, the global economy has encountered distinct challenges, including sluggish growth, technological upheavals, and demographic changes. Consequently, there is a debate on whether the 2% inflation target requires reassessment.

Persistently low inflation

Despite the efforts of central banks, inflation has persisted below the 2% mark in numerous advanced economies, sparking debates over the potential need to modify the target.

Trade-offs

Aiming for a 2% inflation rate can occasionally clash with other policy objectives, like employment or financial stability. It’s crucial for central banks to judiciously manage these competing priorities.

Revision

Several central banks are revising their strategies. For example, the European Central Bank (ECB) has adopted a more adaptable inflation target, permitting temporary exceedances to balance out extended periods of below-target inflation.

The Bank of England also considers broader economic factors when setting policy, rather than rigidly adhering to the 2% target.

IIn summary, although the 2% inflation target has been a helpful benchmark, central banks are progressively willing to adjust their strategies in response to evolving economic conditions. The current debate focuses on striking an optimal balance between stability, growth, and adaptability.

Central banks saw this period of inflation as ‘transitory’ – it wasn’t. It could be argued that their lack of action led to a bigger inflation problem overall.

May 2, 2024September 12, 2025

Fed foe inflation forces U.S. to hold rates and they will likely remain high for some time yet!

The Fed have deliberated over ‘transitory’ inflation – (they got that wrong). They have teased us about when rates will be cut (still waiting). And now we are told no rate cut but: ‘the next rate move is unlikely to be up!’

Probably better to say and do nothing at all? Are you a bit confused? I am.

The U.S. central bank has decided to maintain interest rates, reasoning a ‘lack of further progress’ in reducing inflation. This leaves the Federal Reserve’s key rate at its highest in over two decades, between 5.25% and 5.5%.

Sticky problem

By maintaining high borrowing costs, the Federal Reserve seeks to decelerate the economy and reduce inflationary pressures. However, this also increases the financial burden on businesses due to elevated borrowing expenses and on consumers through higher mortgage and loan payments.

However, as U.S. inflation remains more stubborn than anticipated (and that is being generous), the Fed is now being closely scrutinized over its forthcoming actions.

Analysts, who had predicted rate reductions early this year, have had to delay their projections, with some even suggesting a potential rate hike.

No rate cuts but ‘hike’ unlikely – that’s helpful then

Following the declaration, the Fed Chair reportedly expressed his belief that a rate hike is ‘unlikely,’ reiterating the need for more assurance of subsiding inflation before considering a reduction.

‘The decision will truly be data-dependent; it’s going to take longer to reach that point of comfort. I don’t know how long it will take’, he reportedly stated.

May 1, 2024September 12, 2025

UK house prices fall as lenders raise mortgage rates

House prices declined in April 2024, with affordability pressures persisting for potential buyers, as reported by Nationwide.

The UK’s largest building society reported a 0.4% decrease in house prices compared to the previous month. The average cost of a home now stands at £261,962, which is 4% lower than in the summer of 2022 peak.

According to the report, the increase in borrowing costs was a significant factor in the recent drop in prices.

In recent days a string of lenders raised rates on new fixed-rate mortgage deals.

The rise was driven by expectations that the Bank of England (BoE) would implement fewer and more gradual interest rate reductions.

April 17, 2024September 12, 2025

UK inflation eases to 3.2% but down less than expected

Inflation in the U.K. eased to 3.2% from 3.4% in March, the Office for National Statistics said on Wednesday 17th April 2024.

But a higher-than-expected reading creates more concern as investors push back bets on the timing of the first Bank of England (BoE) rate cut.

Economists expected 3.1% as inflation has been falling gradually since it peaked at 11.1% in late 2022.

Food prices provided the biggest downward drag on the headline rate, the ONS said, while motor fuels pushed it higher.

The core inflation rate, excluding energy, food, alcohol, and tobacco, was reported at 4.2%, slightly above the forecasted 4.1%. Services inflation, closely monitored by U.K. monetary policymakers, decreased from 6.1% to 6%, still surpassing the expectations of economists and the Bank of England (BoE).

The March core inflation figure, remaining above 4%, is expected to fuel speculation that inflation is more persistent than recent projections indicated, potentially delaying the anticipated timing of initial interest rate reductions.

UK inflation 3.2% March 2024

April 15, 2024September 12, 2025

U.S. Supercore inflation measure indicates Fed may have a problem

Markets have fretted about core inflation recently, now analysts are concerned about a highly specific price gauge within the data – ‘supercore’ inflation.

This measure tracks services inflation, excluding food, energy, and housing, which has recently surged, rising 4.8% year-over-year in March 2024 and over 8% on a three-month annualised basis.

The situation is further complicated as some of the most persistent elements of services inflation include essential household expenses such as car and housing insurance, along with property taxes. Wall Street was unsettled by a recent consumer price index report that exceeded expectations, yet the focus is on the ‘supercore’ inflation reading within the data.

Economists also analysed the core CPI, which omits the volatile prices of food and energy, to discern the true inflation trend. The ‘supercore’ gauge goes a step further by also removing shelter and rent costs from its services calculation.

Federal Reserve officials find this measure particularly useful in the current environment, viewing the spike in housing inflation as a transient issue rather than a reliable indicator of underlying price trends.

Supercore inflation accelerated to a 4.8% pace year over year in March 2024, the highest in 11 months.

Sticky inflation problem

Adding complexity to the situation is the declining consumer savings rate coupled with rising borrowing costs, which may compel the central bank to maintain a restrictive monetary policy “until something breaks,” according to Fitzpatrick.

Analysts warn that the Federal Reserve may struggle to reduce inflation through additional rate hikes, as the prevailing factors are more persistent and less responsive to stringent monetary policy.

April 9, 2024September 12, 2025

Does the U.S. jobs boom raise doubts about rate cuts?

U.S. job creation vs inflation and interest rates

The U.S. economy is on a rip, with employers adding around 303,000 jobs in March 2024 – the largest increase in almost a year.

As the world’s largest economy continues to surge, questions arise about the Federal Reserve’s next move regarding interest rates.

Stronger-than-expected Job Growth

The unemployment rate fell to 3.8%, indicating strong job growth in several sectors such as health care, construction, and government. While economists had predicted job gains of approximately 200,000, the actual numbers have easily exceeded those expectations.

The labour market’s surprising resilience has caught analysts off guard, leading to speculation about the timing of interest rate cuts.

Fed’s Dilemma

The Federal Reserve has held interest rates in a range of 5.25%-5.5%, the highest level in over two decades. Initially, the Fed raised rates sharply in 2022 to curb inflationary pressures. However, the subsequent cooling of price inflation (down to 3.2% in February) without a significant spike in unemployment has complicated matters. The central bank now faces a delicate balancing act.

Delayed Rate Cuts?

The significant increase of 303,000 in non-farm payrolls for March 2024 reinforces the Federal Reserve’s stance that the robustness of the economy permits a gradual approach to interest rate reductions.

The Fed had been expected to initiate rate cuts this year to mitigate the impact of high borrowing costs. However, the stronger-than-anticipated economic performance suggests that rate cuts may not occur until the second half of this year.

Labour Market Dynamics

U.S. government spending in areas like high-tech manufacturing and infrastructure has bolstered the labor market. Additionally, an influx of more than three million immigrants last year has expanded the workforce, potentially keeping wage pressures in check. In March, average hourly pay rose by 4.1% year-on-year, consistent with expectations and near a three-year low.

America’s Comeback

President Joe Biden hailed the latest job figures as a “milestone in America’s comeback.” However, some market analysts argue that the strong jobs growth could complicate efforts to return inflation to the Fed’s 2% target. Some analysts even speculate that rate cuts may not materialize until 2025.

Global Implications

Higher U.S. interest rates have ripple effects worldwide, enticing investors to shift capital toward America. While the Fed’s in-tray still has some warnings, the delay in rate cuts reflects the economy’s underlying strength.

The U.S. jobs boom presents a conundrum for policymakers. Balancing economic vitality with inflation control remains a delicate task, and the Fed’s decisions will reverberate far beyond its borders.

April 4, 2024September 12, 2025

Euro zone inflation unexpectedly falls to 2.4% in March 2024

Eurozone inflation eased to 2.4% in March 2024, as indicated by preliminary figures released on Wednesday 3rd April 2024.

This decrease has increased expectations that interest rate cuts may start in the summer 2024.

Market analysts anticipate that the central bank will commence reductions in interest rates starting in June 2024, reflecting recent communications from the ECB.

April 4, 2024September 12, 2025

Fed Chair Powell stresses the importance of additional proof that inflation is subsiding before cutting interest rates

Federal Reserve Chairman Jerome Powell stated on Wednesday 3rd April 2024 that policymakers will need time to assess the current inflation situation, leaving the schedule for potential interest rate reductions unclear.

Referring to the stronger-than-anticipated price pressures at the year’s onset, Powell reportedly stated that he and his colleagues are not in a hurry to relax monetary policy.

Market expectations are leaning towards the FOMC initiating policy easing this year, although adjustments to the anticipated timing and scale of reductions have been necessary due to persistently high inflation.

Meanwhile, other economic indicators, especially in the U.S. labour market and consumer spending sectors, remain robust, affording the Fed the opportunity to evaluate the prevailing situation prior to taking action.

The target rate is 2%.

March 19, 2024September 12, 2025

Bank of Japan ends negative rates: a seismic shift in monetary policy

In a move that reverberated across global financial markets, the Bank of Japan (BOJ) recently bid farewell to its negative interest rate policy – the last of its kind in the world. This decision marks a pivotal moment in the realm of central banking and has far-reaching implications for economies and investors worldwide.

The Negative Interest Rate Saga

To understand the significance of this shift, let’s rewind the clock. Japan, grappling with deflation for years, embarked on an ambitious economic experiment known as ‘Abenomics’ in 2013. The strategy combined massive government spending with unconventional monetary measures. The BOJ, under the leadership of then-Prime Minister Shinzo Abe, injected liquidity into the system by purchasing bonds and other assets. The goal? Achieve a 2% inflation target and kickstart growth.

Among these measures was the adoption of negative interest rates. The idea was simple: discourage banks from hoarding excess reserves and encourage lending. However, the path to higher inflation proved elusive, and the BOJ found itself navigating uncharted waters.

The Change

Fast forward to 2024. Japan’s economy has experienced a moderate recovery, prompting policymakers to reassess their strategic options. The Bank of Japan (BOJ) has elevated its short-term interest rate from minus 0.1% to a range between zero and 0.1%. This adjustment marks the first increase in rates since 2007, representing a significant, even a ‘seismic’ policy shift.

The Effect

Policy Pivot: The BOJ acknowledges that negative rates have played their part. With improving wages and corporate profits, the time is ripe for a change. The new rate range signals a departure from the era of ultra-accommodative policies.
Global Implications: Japan now stands as the last central bank to exit negative rates. For years, central bankers worldwide wielded cheap money and unconventional tools. Now, the tide turns. The era of negative rates draws to a close, and other central banks take note.
Market Response: Tokyo’s Nikkei 225 index responded positively, gaining 0.7%. The Japanese yen weakened against the dollar. Investors recalibrate their strategies, adjusting to a world where negative rates are no longer the norm. The Nikkei is sitting close to or at its all-time high!

Nikkei 225 3 month chart at: 40003 – close to its recent new all-time high of 40109

The future?

As the BOJ takes its first step toward policy normalization, questions abound. Will further rate adjustments follow? How will markets adapt? And what does this mean for global liquidity?

One thing is certain: The decision of the Bank of Japan resonates beyond the confines of the nation. It heralds the beginning of a new era in which central banks adjust their strategies, economies establish stability, and investors once more chart a course through unfamiliar territory.

Within the chronicles of monetary history, the cessation of negative rates at the Bank of Japan will be marked as a pivotal moment. As the final details of this policy transition are solidified, the global community observes, prepared for the forthcoming developments.

Disclaimer: The views expressed in this article do not constitute financial advice. Readers are encouraged to consult professional advisors before making any investment decisions.

Remember to always do your own research

RESEARCH! RESEARCH! RESEARCH!

March 12, 2024September 12, 2025

U.S. consumer prices rose 0.4% in February 2024 and 3.2% from a year ago

The U.S. Consumer Price Index, a comprehensive gauge of the cost of goods and services, rose by 0.4% for the month and increased by 3.2% compared to the previous year.

The annual rate was marginally higher than expected. The monthly rate was slightly above the forecast of 0.3%. This may likely direct the Federal Reserve to hold off on an interest rate reduction, at least until the summer of 2024. What will Wall Street make of it?

The core Consumer Price Index increased by 0.4% monthly and recorded an annual rise of 3.8%. Both figures exceeded forecasts by one-tenth of a percentage point.

An increase of 2.3% in energy costs contributed to the rise in the overall inflation figure. Food prices remained mostly unchanged for the month, while housing expenses saw a further increase of 0.4%.

**U.S. consumer price index data for February 2024** **– Month on month**

**U.S. consumer price index data for February 2024** – **Year on year**

March 7, 2024September 12, 2025

Powell says the Fed is not ready to start cutting interest rates yet

In his Capitol Hill testimony on 6th March 2024, Federal Reserve Chairman Jerome Powell reiterated that was not yet time to begin cutting interest rates.

To fight inflation, which reached a rate of 9% in the summer of 2022, the central bank has significantly increased interest rates in recent times. However, prices are still stubborn, especially for things like housing and groceries.

Due to the robust economic performance in early 2024, the expected reduction in interest rates has been postponed. Instead of taking place this month, the rate cuts are now more probable in May or June 2024.

Powell reportedly said: ‘The Committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.’

He reiterated the pledge to lower inflation to the 2% target and keep long-term inflation expectations stable.

UPDATE

On Thursday 7th March 2024 Powell also said: the Fed is ‘not far’ from the point of cutting interest rates

February 1, 2024September 12, 2025

Bank of England holds interest rate at 5.25%

UK interest rates have been left unchanged at 5.25% by the Bank of England as widely expected by commentators.

It is the fourth time in a row the Bank has held rates at 5.25%.

The Bank of England had previously raised rates 14 times in a row to curb inflation, leading to increases in mortgage rates but also creating better rates for savers.

Interest rate chart from 2007 to January 2024 demonstrates just how low interest were between 2009 and 2022

Attitude shift

There is a noticeable shift in opinion as the committee entertained the possibility of discussing the feasibility of cuts.

There was a three-way split, with two members of the Monetary Policy Committee (MPC) voting to increase the bank rate to 5.5%; one to reduce it to 5%; and six were in favour of sticking with 5.25%.

With inflation falling it is very likely the interest rates will be reduced by 0.25% by March 2024. Just take a look at the reduction in savers rates that have already occurred.

The anticipation is for a rate reduction soon.

The clue is that savers rates are being cut.

But

The Bank of England Governor, Andrew Bailey, has made clear that for him the key question is: ‘For how long should we keep rates at the current level?’

There may be disappointment ahead then – but a rate cut is next and I still expect it by Easter.

February 1, 2024September 12, 2025

U.S. Federal Reserve Bank holds interest rates at 5.25% – 5.50% and indicates reluctance to cut just yet

The Federal Open Market Committee (FOMC) held interest rates steady and indicated a willingness stop raising interest rates.

But a cut anytime soon is unlikely until inflation is brought fully under control and nearer to the Fed’s 2% inflation target.

The Federal Reserve sent a signal that it is finished with raising interest rates but made it clear that it is not ready to start cutting, just yet. It also said there are no plans yet to cut rates with inflation still running above the central bank’s target.

Federal Reserve interest targets and increases since 2022 to January 2024

January 26, 2024September 12, 2025

Turkey hikes interest rate to 45% after inflation touches 65%

Turkey’s central bank on Thursday 25th January 2024 hiked its key interest rate to 45%.

It comes amid an ongoing struggle against double-digit inflation for Turkey’s policymakers, with the rate hike the latest step in that ongoing fight.

30 Turkish Lira to 1 U.S. dollar

Inflation in Turkey increased nearly 65% year-on-year in December 2023, up from 62% in November, and the country’s currency, the lira, hit a new record low against the U.S. dollar earlier in January 2024 at 30 Lira to $1.

Analysts predict this will be the last hike for some time, especially with local elections approaching in March 2024

January 17, 2024September 12, 2025

UK inflation ticks up slightly in January 2024

Inflation, rose marginally to 4% in December, up from 3.9% in November 2023.

Economists had forecast a slight fall but unexpected rises in alcohol and tobacco prices were behind the surprise rise.

However, with energy bills predicted to come down in 2024, there are still expectations of interest rate cuts later this year.

On target still for 2%?

As we have seen in the Germany, the U.S., and France, inflation does not fall in a straight line, ‘but our plan is working and we should stick to it,‘ Jeremy Hunt reportedly said in a statement.

UK inflation from April 2019 to December 2023

Unprepared for both the start and the end of the pandemic

Increases in the cost of energy and food costs, started by pandemic lockdowns ending exasperated further by Russia’s invasion of Ukraine and more recently the conflict in Israel have put household finances under extreme pressure.

The UK and other countries were woefully underprepared for all of these events as they ‘began’ and at the ‘end’. We did not prepare to come out of them – there was no exit plan!

Markets and traders are still expecting BoE to cut its base rate in 2024 due to the fast-falling inflation rate. It peaked at 11.1% in October 2022 – and now sits at 4%.

The question is: will the economic recovery be good enough to allow the Bank of England to start cutting rates?

The UK interest rate currently sits at 5.25%.

January 4, 2024September 12, 2025

The Fed in December 2023 saw rate cuts likely in 2024, but that path is uncertain

Federal Reserve officials in December concluded that interest rate cuts are likely in 2024, though they appeared to provide little in the way of when that might occur, according to minutes from the meeting released Wednesday 3rd January 2024.

FOMC meeting minutes

The rate-setting Federal Open Market Committee (FOMC) agreed to keep its rate steady in a range between 5.25% and 5.5%. Members indicated they expect 0.75% cut by the end of 2024.

Uncertainty

However, the meeting summary noted a high level of uncertainty over how, or even if, that will happen. Markets have reacted negatively to this news.

The minutes noted an unusually elevated degree of uncertainty about the policy path. Several members said it might be necessary to keep the funds rate at an elevated level if inflation doesn’t cooperate, and others noted the potential for additional increases.

But, despite this cautionary tone from Fed officials, markets expect the central bank to cut rates in 2024.

Dot plot

The dot plot of individual members’ indications released following the meeting showed that members expect cuts over the coming three years. This will bring borrow back to the 2% desired target.

The minutes indicated that clear progress had been made against inflation, with a six-month measure of personal consumption expenditures even indicating that the inflation rate has edged below the Fed’s 2% target.

FOMC Dot plot projections through 2026

However, the document also noted that progress has been uneven across sectors, with energy and core goods moving lower but core services still moving higher.

The Dot plot – what is it?

The dot plot, in relation to the FED or FOMC, is a chart that shows the projections of the Federal Reserve Board members and Federal Reserve Bank presidents for the federal funds rate, which is the interest rate that U.S. banks charge each other for overnight loans.

The dot plot is updated four times a year, after each FOMC meeting, and reflects the individual views of the policymakers on the appropriate level of the federal funds rate for the current year, the next few years, and the longer run.

The graph (dot plot) can help markets and the general public understand the Fed’s monetary policy stance and expectations for the future path of interest rates.

However, the dot plot is not a policy commitment or a forecast, but rather a snapshot of the opinions of the FOMC participants at a given point in time. The dot plot can change over time as new information and economic conditions develop.

January 4, 2024September 12, 2025

UK mortgage rates fall in January 2024

Mortgage lenders have started 2024 by cutting interest rates.

The UK’s biggest lender, the Halifax, has cut some interest rates by nearly a full 1%, with other lenders expected to follow suit. HSBC has announced it will also make cuts in January.

Halifax is reducing its rates, with interest on a two-year fixed deal being cut by up to 0.83%. HSBC is due to reduce rates on its two-year fixed rate for remortgages (for someone with at least 40% equity in their home) falling below 4.5% for the first time since early June last year.

Mortgage rate chart October 2021 – January 2024

The Bank of England’s (BoE) benchmark interest rate has been held three times at 5.25%, analysts now expect the next move to be down.

November 23, 2023September 12, 2025

Fed minutes show no indication of U.S. rate cuts at last meeting

Federal Reserve members, in their most recent meeting, gave little indication of cutting interest rates anytime soon, particularly as inflation remains well above their goal of 2%, according to minutes released Tuesday 21st November 2023.

The detail of the meeting held 31st October – 1st November 2023, showed that Federal Open Market Committee (FOMC) members are still concerned that inflation could be stubborn or move higher, and that more may need to be done.

They indicated that policy would need to stay ‘restrictive’ at the very least, inflation is on a convincing move back to the central bank’s 2% goal.

Fed next meet 13th December 2023.