| from Hi there, it's Sabah Meddings, UK business reporter. Hope you enjoy today's Readout. Don't get too excited. That was the message from central bank watchers today after the Bank of England cut interest rates for the first time since the pandemic. The Monetary Policy Committee voted 5-4 to reduce rates from 5.25% to 5%, in what was apparently a "finely balanced" decision for some who supported the move according to minutes from the meeting. That could be a possible sign that further reductions may come only slowly and cautiously. That caution was echoed by Chancellor Rachel Reeves, who described the announcement as "welcome news" but repeated the line that "difficult decisions" will still be necessary — which may come as tax rises in her October budget. Bank of England Governor Andrew Bailey was also careful to manage any exuberance, saying the BOE remains alert to the risk of inflation rising again. The tone of the minutes of the meeting today suggests the BOE is in no rush to reduce rates again, say Bloomberg Economics's Ana Andrade and Dan Hanson, who expect another cut in November.  Andrew Bailey at a news conference following the cut decision today Photographer: Hollie Adams/Bloomberg Nevertheless, today's decision is a major turning point for the BOE and will give homeowners and businesses some relief, and maybe even the confidence to invest. Borrowing costs in the UK have been stuck at a 16-year high for a year, weighing on an economy which is struggling to emerge from a shallow recession. As our economics reporting team write, the bank's forecasts point to a steeper path of rate cuts over the next three years than investors were expecting. However, the British Chambers of Commerce says declining borrowing costs may still trigger an increase in investment as borrowing costs decline. For Keir Starmer, the cut is an early gift, as pointed out by Bloomberg Opinion's Marcus Ashworth. But for the Conservatives, the decision is likely to raise yet more questions about why Rishi Sunak called the election when he did. Sunak has taken some of the credit for the cut, writing on X that it shows Labour inherited a strong economy. He also threw shade at Reeves's public sector pay rises, adding the "inflation-busting" increase would put further rate cuts at risk. But for his part, Bailey said that according to his "back of the envelope" calculations the public sector pay rises will have almost no impact on inflation. Want this in your inbox each weekday? You can sign up here. | 
No comments:
Post a Comment