Bank of England holds firm at 5.25%

Bank of England holds firm at 5.25%

13:06 PM, 2nd November 2023, About 7 months ago 2

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The Bank of England’s Monetary Policy Committee (MPC) voted 6 to 3 to maintain the Bank Base Rate at 5.25%. Despite the Fed freezing the US rate yesterday, three MPC members still voted to increase the Base Rate by 0.25%.

The latest MPC forecast market-implied path for rates was adjusted down to maintain at around 5.25% until Quarter 3 2024 and then reduce slowly by 1% to 4.25% by the end of 2026.

Employment growth is weakening with falling vacancies and reduced pressure on recruitment difficulties easing inflationary effects within the Labour market with pay and wage growth expected to reduce. This along with near-stagnant GDP forecasts was a major factor in the decision not to increase the monetary policy pressure on the economy.

CPI inflation also came in below previous projections at 6.7% with this figure predicted to fall to target of 2% by the end of 2025

The Bank of England Summary stated: “The MPC will continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as a whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation. Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2% target sustainably in the medium term, in line with the Committee’s remit. The MPC’s latest projections indicate that monetary policy is likely to need to be restrictive for an extended period of time. Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.”

“There are also upside risks to inflation from energy prices given events in the Middle East. Taking account of this skew, the mean projection for CPI inflation is 2.2% and 1.9% at the two and three-year horizons respectively. Conditioned on the alternative assumption of constant interest rates at 5.25%, which is a higher profile than the market curve beyond the second half of 2024, mean CPI inflation returns to target in two years’ time and falls to 1.6% at the three-year horizon.”


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Comments

Arthur Smith Fitchett

9:34 AM, 3rd November 2023, About 7 months ago

Encouraging to see that the Committee’s vote improved from 5 to 4 in September to 6 to 3 in this month’s decision to maintain at 5.25%. I am always concerned by the overzealousness of some of the members to keep pushing for increases based on current CPI figures, rather than waiting to see what the effects are of previous increases as they feed in through the system which can take a few months.
While increases were certainly due, to abate the reckless credit borrowing that cheap money had driven in many sectors of the population (even some of the local tattoo parlours around Oxford are offering their services on the “never-never”!), what I have seen driving inflation in this country is pure greed on the part of anyone who feels that they can blame Brexit, War in Ukraine, Energy Prices, etc. for hiking their prices well above what was necessary to counter these issues, if indeed they had any actual affect on their business at all.
Working, as we all do, with the building industry is a case in point, with many “builders” feeling that they can still make up for any Covid losses by hiking their charges. We have now dispensed with the services of several previous long term trades suppliers, as they are just over-charging compared with what their actual costs are. So my advice to any landlords out there is ask around and get some quotes in from new suppliers for your Gas Safety and Electrical Checks, carpet cleaning, Insurance, etc. You’ll be surprised how much you can save over the course of a year and, at the moment, we all need to cut costs to make this work, whether still private or incorporated.
All the best,
A Private Landlord providing homes for vulnerable families.

Mick Roberts

9:03 AM, 4th November 2023, About 7 months ago

Let's hope for those on Tracker mortgages

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