\n<\/p>\n
Newsflash: The Bank of England has voted to leave UK interest rates on hold.<\/strong><\/p>\n In a decision widely expected by economists, the BoE is maintaining Bank rate at 3.75%.<\/p>\n The decision is not unanimous, though \u2013 two policymakers wanted to hike interest rates to 4%, but were outvoted by the other seven who voted to hold rates.<\/p>\n Announcing the decision, the Bank says:<\/p>\n double quotation markGlobal energy prices have fallen since the previous meeting in response to events in the Middle East. But they remain higher than pre-conflict and have continued to be volatile.<\/p>\n The impact of the energy shock on the UK economy remains uncertain. Monetary policy cannot influence energy prices but is being set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably.<\/p>\n The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy.<\/p>\n The Bank of England had cut rates six times since mid-2024 and was expected to continue doing so, before Trump\u2019s Operation Epic Fury led to Iran choking off oil supplies from the Gulf.<\/p>\n Share<\/span><\/span><\/p>\n Key events<\/p>\n <\/span><\/span><\/p>\n Time for a recap<\/p>\n The Bank of England has kept interest rates on hold at 3.75% in June, and lowered its forecast for inflation over the rest of the year.<\/strong><\/p>\n The Bank\u2019s monetary policy committee voted 7-2 to leave rates on hold, with the majority of policymakers deciding it would be premature to raise rates now given uncertainty about the strength of increased inflation pressures.<\/p>\n The Bank also predicted inflation would \u201cpick up to a little over 3.25% in Q4\u201d, lower than forecast in April.<\/p>\n The governor of the BoE warned consumers to expect higher costs this year as a result of the conflict in the Middle East, despite falling oil prices as the US and Iran near a peace deal.<\/p>\n Andrew Bailey said there was \u201cstill some inflationary pressure in the pipeline\u201d after the conflict pushed up energy prices.<\/p>\n The Bank\u2019s decision came hours after the UK\u2019s unemployment rate fell, to 4.9%, in the three months to April.<\/p>\n The latest figures from the Office for National Statistics also shows that the number of UK job vacancies fell to its lowest level for five years as businesses cut back on recruitment.<\/p>\n The number of job vacancies in the March to May period fell by 19,000 to 707,000, the ONS said, the lowest level since February to April 2021.<\/p>\n Share<\/p>\n Deutsche Bank are sticking with their forecast that UK interest rates will be unchanged through the rest of this year.<\/strong><\/p>\n Their chief UK economist, Sanjay<\/strong> Raja<\/strong>, says there are three lessons from today\u2019s interest rate decision.<\/p>\n double quotation markFirst, the MPC may, on paper, be more divided than in April \u2013 but there is a stronger consensus to keep Bank Rate on hold for now. Two members (Pill and Greene) opted for a rate hike, as we expected. But we think there is a growing consensus for a long hold given the more favourable economic and geopolitical backdrop.<\/p>\n Second, for the MPC, recent data outturns combined with an Iran\/US deal have meant that the risk around second-round effects has receded. Indeed, while the MPC still sees upside risks to inflation, lower wage and price inflation has given the MPC more confidence that price pressures may be more contained for now. Put simply, despite an inevitable inflation wave in the coming months, the MPC may be willing to tolerate and look through a temporary bump in price momentum.<\/p>\n Third, the MPC has retained full optionality heading into summer. Despite better data and a dramatic fall in energy prices over the last week, the MPC avoided sounding too dovish. Instead, the MPC maintained its hawkish bias \u2013 keeping flexibility should there be any meaningful signs of indirect and\/or second-round effects. While financial conditions have tightened since the war began, the MPC\u2019s decision today reflects the importance of maintaining some policy restriction in market pricing \u2013 allowing the MPC to stick to its \u2018active hold\u2019 strategy.<\/p>\n Share<\/p>\n JP \u2060Morgan<\/strong> has now \u2060pushed \u2060back its forecast \u200bfor the \u2060Bank of England to raise \u2060interest \u200brates \u200cto November \u200cthis year, \u200cafter today\u2019s decision to maintain Bank rate at 3.75%, Reuters reports<\/em>.<\/p>\n It had \u2060previously expected \u200ba quarter \u200bpoint \u200brate \u200bhike in \u200cJuly.<\/p>\n Share<\/p>\n Bank of England Governor Andrew<\/strong> Bailey<\/strong> has told broadcasters that stability was important, when asked \u2060about the Makerfield by-election \u2060which \u200bcould return Greater Manchester Mayor Andy Burnham to parliament.<\/p>\n With Burnham hoping a successful byelection will mean he can encourage Keir Starmer to step aside as prime minister, Bailey<\/strong> explained:<\/p>\n double quotation mark\u201cStability is important, I think \u200ceverybody recognises that.\u201c<\/p>\n \u201cThis is not one part of the political spectrum versus another. I think everybody recognises the importance of stability.\u201d<\/p>\n Share<\/p>\n Kalyeena Makortoff<\/span><\/p>\n City lobby groups are being incredibly cautious in responding to Tory leader Kemi Badenoch\u2019s proposals to eradicate bank ringfencing and the Financial Ombudsman Service (FOS) (see earlier post).<\/strong><\/p>\n There seem to be a few factors at play, including the fact that not all of their members are going to be on board (read: Barclays\u2019 opposition to changing ringfencing rules).<\/p>\n Scrapping the FOS could also prove politically sensitive and there is also no guarantee that its replacement would be swiftly introduced and efficiently implemented.<\/p>\n There\u2019s also a matter of how much a FOS replacement and reversing ringfencing might cost firms in the end.<\/p>\n In a statement, TheCityUK\u2019s<\/strong> CEO Miles<\/strong> Celic<\/strong> was careful not to take sides, saying:<\/p>\n double quotation markThe leader of the opposition\u2019s speech is an important contribution to the debate on how financial services can best support growth across the UK.<\/p>\n There is a clear need to ensure our tax and regulatory framework is competitive, proportionate and predictable. This has to be built on the high standards that underpin trust in the UK markets.<\/p>\n Likewise, UK<\/strong> Finance<\/strong> said:<\/p>\n double quotation markFinancial services are vitally important to the UK economy, and we welcome engagement on how to get the best from the sector and enhance UK competitiveness.<\/p>\n Ensuring reforms are delivered, from enabling responsible risk\u2011taking to reform of bank capital requirements, will help the sector support investment and growth across the wider economy, as set out in our recent Plan for Growth: From Strategy to Delivery report.<\/p>\n Share<\/p>\n Updated at\u00a009.36 EDT<\/p>\n Meanwhile in the US, there appears to have been a small drop in the number of people being laid off.<\/strong><\/p>\n The number of new initial claims for unemployment support fell by 4,000 last week to 226,000, indicating American workers continued to hold onto staff.<\/p>\n Share<\/p>\n Reaction to today\u2019s UK interest rate decision is pouring in.<\/p>\n ING\u2019s James Smith<\/strong> predicts the next move in UK interest rates will be downwards, next year:<\/p>\n double quotation markThere\u2019s nothing in today\u2019s decision that changes our mind that the next move is likely to be a rate cut in 2027. It feels like it would take a lot for the five more neutral-to-dovish members of the nine-strong committee to vote for a hike, barring the Iran deal falling apart and energy prices moving materially higher<\/p>\n Ruth<\/strong> Gregory<\/strong>, deputy chief UK economist at Capital Economics,<\/strong> says the Bank of England is talking \u201ca good hawkish game\u201d \u2013 with two votes to raise interest rates \u2013 but is unlikely to deliver.<\/p>\n double quotation markThe last thing the MPC wants to do is unwind some of the tightening in financial conditions priced into the markets. And while there are important differences with the energy shock in 2022, the Bank won\u2019t want to make the same mistake as then, when it was widely criticised for keeping policy too loose for too long.<\/p>\n The key point is that the hawkishness of Pill and Greene does not seem to have been replicated amongst the four \u201ccentrists\u201d (Lombardelli, Bailey, Breeden and Ramsden). This suggests there hasn\u2019t been a material shift in the Bank\u2019s \u201creaction function\u201d. And it means the hawks probably won\u2019t have the five votes required for a rate hike soon.<\/p>\n David<\/strong> Muir<\/strong>, senior economist at Moody\u2019s<\/strong> Analytics<\/strong>, suggests the Bank could avoid raising interest rates this year, unless the US-Iran peace deal falters:<\/p>\n double quotation markWith demand subdued, labour market conditions weak, and the outlook for energy prices less concerning, a rate hold was no surprise at June\u2019s Monetary Policy Committee meeting. The decline in energy prices following the U.S.-Iran agreement gives us greater confidence that the Bank of England will avoid a rate hike in the second half of the year and instead address the energy-driven rise in inflation through a prolonged pause. But an unravelling of the deal would raise the risk of a precautionary hike aimed at anchoring inflation expectations and containing second-round effects on prices and wages.<\/p>\n Share<\/p>\n The pound has fallen to its lowest level against the US dollar in over two months, after the Bank of England left interest rates on hold today.<\/strong><\/p>\n Sterling is down 0.8 of a cent, or -0.6%, to $1.3207 against the dollar, the lowest since 6 April.<\/p>\n That suggests the City sees today\u2019s decision as somewhat dovish, with the bank also lowering its forecasts for inflation by the end of the year (see earlier post).<\/p>\n However, the money markets are still pricing in one interest rate hike by the end of the year.<\/p>\n Daniela<\/strong> Hathorn<\/strong>, senior market analyst at capital.com, <\/strong>says:<\/p>\n double quotation markDespite the hawkish undertones of the BoE statement, sterling weakened sharply against the dollar, the euro, and the yen following the decision. The move suggests markets focused less on the 7-2 vote split and more on the Bank\u2019s decision to lower its inflation outlook and acknowledge progress on disinflation.<\/p>\n However, the decline in GBP does not necessarily reflect a dovish repricing of UK rates.<\/p>\n Indeed, markets continue to price in the possibility of a rate hike by year-end, supported by the dissenting votes from Greene and Pill, the MPC\u2019s emphasis on second-round inflation risks, and Bailey\u2019s warning that higher energy prices could still feed through into broader price pressures.<\/p>\n Share<\/p>\n Policymakers Huw Pill<\/strong> and Megan<\/strong> Greene<\/strong> have both insisted that it would have been better to raise UK interest rates today, rather than hold them.<\/p>\n BoE<\/strong> chief economist Pill<\/strong> warns that \u201cupside risks\u201d to hitting the Bank\u2019s 2% inflation target have increased in recent months due to war in the Middle East.<\/p>\n He explains that he continues to favour \u201cprompt but modest action\u201d on interest rates now. saying:<\/p>\n double quotation markRecognising the significant uncertainty that surrounds the UK inflation outlook, raising Bank Rate to 4% continues to be the most robust monetary policy response to the intensification of these risks.<\/p>\n Greene<\/strong>, who joined with Pill<\/strong> in voting for a rate rise today, argues that the Bank should be pursuing a \u201crisk management strategy\u201d, of raising rates now in case the \u2018second-round effects\u2019 from the energy shock (ie, a wage-price spiral) are stronger than the Bank predicts.<\/p>\n She argues that higher interest rates would cool households\u2019 and firms\u2019 inflation expectations, saying:<\/p>\n double quotation markHiking Bank Rate assuming greater second-round effects, then discovering they were smaller and course-correcting results in a very moderately lower output gap and inflation returns to target at the end of the forecast period.<\/p>\n These risks are asymmetric, so we should insure against the possibility of larger second-round effects until we have evidence to determine they are not materialising. A proactive hike now in Bank Rate should help anchor inflation expectations.<\/p>\n Share<\/p>\n The Bank of England\u2019s governor, Andrew Bailey, <\/strong>has explained that he is content to hold interest rates today \u2013 but would respond \u2018promptly\u2019 if there were signs that high energy cost were driving up prices in the shops, or wages.<\/p>\n Bailey<\/strong> uses the MPC members\u2019 views <\/strong>section of today\u2019s minutes to lay out his thinking, saying:<\/p>\n double quotation markThere has been a marked fall in energy prices in recent days, reflecting progress on talks involving US and Iran. But the situation remains unpredictable, and there is clearly a risk that energy prices remain elevated for an extended duration. Recent inflation outturns give greater confidence that gradual underlying disinflation has continued. Labour market data show some further softening, and there are further signs of demand weakness.<\/p>\n Our remit recognises that attempting to bring inflation back to the target too quickly may cause undesirable volatility in output.<\/p>\n Given the context at present of softness in the real economy and uncertainty around the scale and duration of the shock to energy prices, tolerating temporarily above-target inflation as part of a return to target is an appropriate way to approach the trade-off, providing inflation expectations remain contained. I am content at the present time with holding, while accepting that risks to inflation and interest rates are on the upside, as reflected in the upward slope in the sterling yield curve, which appears to be accounted for more by risk premia than expected rates. I would respond promptly to any signals that an extended period of elevated energy prices could be leading to stronger possible second-round effects.<\/p>\n Share<\/p>\n The Bank of England has trimmed its forecast for how fast UK inflation will rise this year.<\/strong><\/p>\n The BoE now predicts that CPI inflation \u2013 which was 2.8% last month \u2013 is now expected to be a little under 3% in the third quarter of this year, and \u201cpick up to a little over 3.25% in Q4\u201d.<\/p>\n That\u2019s a downgrade compared with April; two months ago, the Bank forecast inflation would hit 3.3% in Q3, and \u201crise somewhat further in Q4.\u201d.<\/p>\n Share<\/p>\n Announcing today\u2019s interest rate decision, the Bank of England says that the conflict in the Middle East, and its impact on energy prices and the UK economy, remained the \u201cdominant source of uncertainty for the inflation outlook\u201d.<\/strong><\/p>\n The minutes of this week\u2019s meeting say:<\/p>\n double quotation markAs had been outlined in the April Monetary Policy Report and Minutes, monetary policy could not influence global energy prices. And it would take time for monetary policy to work through the economy, so any action the MPC might take would not prevent higher inflation in coming months. What the MPC would do is set monetary policy to make sure that the effects of the shock did not become embedded into broad-based inflationary pressures, so that inflation fell back to the 2% target and stayed there.<\/p>\n Share<\/p>\n Bank of England chief economists Huw Pill again voted to raise interest rates, as he also did at the last meeting (and was outvoted then too).<\/strong><\/p>\n But this time he had company \u2013 external MPC member Megan<\/strong> Greene<\/strong> also voted to increase rates to 4%.<\/p>\n Share<\/p>\n Updated at\u00a007.09 EDT<\/p>\n Newsflash: The Bank of England has voted to leave UK interest rates on hold.<\/strong><\/p>\n In a decision widely expected by economists, the BoE is maintaining Bank rate at 3.75%.<\/p>\n The decision is not unanimous, though \u2013 two policymakers wanted to hike interest rates to 4%, but were outvoted by the other seven who voted to hold rates.<\/p>\n Announcing the decision, the Bank says:<\/p>\n double quotation markGlobal energy prices have fallen since the previous meeting in response to events in the Middle East. But they remain higher than pre-conflict and have continued to be volatile.<\/p>\n The impact of the energy shock on the UK economy remains uncertain. Monetary policy cannot influence energy prices but is being set to ensure that the economic adjustment to them occurs in a way that achieves the 2% inflation target sustainably.<\/p>\n The policy stance required to achieve this will depend on the scale and duration of the shock, and how it propagates through the economy.<\/p>\n The Bank of England had cut rates six times since mid-2024 and was expected to continue doing so, before Trump\u2019s Operation Epic Fury led to Iran choking off oil supplies from the Gulf.<\/p>\n Share<\/p>\n The BoE\u2019s MPC will almost certainly keep interest rates on hold today, and probably in July as well, reports Professor Costas Milas, of the University of Liverpool\u2019s Management School.<\/strong><\/p>\n He explains:<\/p>\n double quotation markFirst, as Dr Papapanagiotou and I show in a brand new blog published today for LSE Business Review, a model which takes into account UK economic policy uncertainty (EPU) in addition to output growth and inflation developments (Chart 3 in the blog) is quite impressive at forecasting BoE\u2019s policy rate. EPU is currently elevated, not least because of today\u2019s by-election, and this will put off MPC members for hiking.<\/p>\n Second, and as we discuss in the LSE Business Review blog, the BoE has been looking at interest rate rises in three different scenarios, depending on oil prices hitting $108 or $130 per barrel. Following the 60-day \u201cdeal\u201d between the US and Iran, oil currently trades at less than $75 currently. All in all, my expectation is that the MPC will hold both today and on July the 30th!<\/p>\n Share<\/p>\n Britain\u2019s stock market is in the red ahead of the Bank of England\u2019s interest rate decision, due in 15 minutes time.<\/strong><\/p>\n The FTSE 100<\/strong> share index is down 107 points, or just over 1%, at 10,401 points. That follows losses on Wall Street last night, after the US Federal Reserve was more hawkish than expected.<\/p>\n Other European markets are faring better, with Germany\u2019s DAX<\/strong> and France\u2019s CAC<\/strong> both up over 0.1%.<\/p>\n Share<\/p>\n The US dollar has climbed to its highest level in over a year, after America\u2019s central bank indicated it could raise interest rates later this year.<\/strong><\/p>\n Half the policymakers at the Federal Reserve predicted there would be at least one increase in US interest rates this year. The Fed also left rates on hold last night, as expected.<\/p>\n This has pushed the dollar index up to its highest level since May 2025.<\/p>\n Share<\/p>\n","protected":false},"excerpt":{"rendered":" Bank of England leaves interest rates on hold Newsflash: The Bank of England has voted to leave UK interest rates on hold. In a decision widely expected by economists, the BoE is maintaining Bank rate at 3.75%. The decision is not unanimous, though \u2013 two policymakers wanted to hike interest rates to 4%, but were<\/p>\n","protected":false},"author":1,"featured_media":50472,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[3189,303,898,311,2213,419,1562,2973,519,2013,13533,897,520,3785],"class_list":{"0":"post-50471","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-bank","9":"tag-business","10":"tag-east","11":"tag-england","12":"tag-forecast","13":"tag-happened","14":"tag-hold","15":"tag-inflation","16":"tag-interest","17":"tag-leaves","18":"tag-lowers","19":"tag-middle","20":"tag-rates","21":"tag-uncertainty"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/50471","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=50471"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/50471\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/50472"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=50471"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=50471"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=50471"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}Closing post<\/h2>\n
City cautious over Badenoch’s reform plans<\/h2>\n
Experts doubt Bank will raise interest rates this year<\/h2>\n
Pound hits 10-week low against the dollar<\/h2>\n
The case for a rise in interest rates<\/h2>\n
Andrew Bailey: I am content at the present time with holding rates<\/h2>\n
Bank of England lowers inflation forecast<\/h2>\n
BoE: Middle East is \u201cdominant source of uncertainty” for inflation<\/h2>\n
Pill and Greene wanted rate rise<\/h2>\n
Bank of England leaves interest rates on hold<\/h2>\n