Closing post
Time to wrap up….
Bank of England policymakers have left interest rates unchanged at 3.75%, but indicated that lower inflation as a result of cost-of-living measures in Rachel Reeves’s budget should pave the way for cuts in the months ahead.
The nine-member monetary policy committee (MPC) voted to leave borrowing costs on hold, despite forecasting weaker growth and lower inflation than at its last quarterly forecast in November.
But the narrower than expected 5-4 split in the MPC’s voting suggested further reductions in borrowing costs were to come. The committee has cut rates six times since mid-2024.
Andrew Bailey, the Bank’s governor, who voted to hold rates, said:
“We now think that inflation will fall back to about 2% by the spring. That’s good news. We need to make sure inflation stays there, so we’ve held rates unchanged at 3.75% today. All going well, there should be scope for some further reduction in bank rate this year.”
During a press conference, Bailey said he was ‘shocked’ by recent revelations of communications between Peter Mandelson and Jeffrey Epstein during the financial crisis.
“How is it that we live in a society in which this happened while the cover-up happened as well?
I think that is a very fundamental question that we have to ask ourselves.”
An emotional Bailey contrasted Mandelson’s actions with the late chancellor, Alistair Darling, who he said acted “with a thorough sense of honesty and decency”
He also said the Bank was seeing evidence that AI was hitting hiring across the UK.
Economists expect the Bank to cut interest rates at least two times this year, with Unicredit predicting four cuts by Christmas, bringing rates down to 2.75%.
In other news….
Rio Tinto and Glencore have abandoned plans for a megamerger that would have created the world’s largest mining group.
Bailey: 50:50 odds of rate cut in March 'not a bad place to be'
The City money markets are indicating there’s a 50:50 chance that the Bank of England cuts interest rates at its next meeting in March.
And BoE governor Andrew Bailey has told Bloomberg TV that that’s reasonable, and “not a bad place to be”.
Bailey says:
“So I think going into March, 50-50 is not a bad place to be... because in a sense markets are asking themselves the same question that I’m asking.”
