Closing summary
Time for a recap.
The pound has dropped to its lowest level in three months, after Bank of England governor Andrew Bailey told MPs that UK interest rates may not need to rise much higher.
Testifying to the Treasury committee, Bailey indicated that borrowing costs may be near their peak, after 14 consecutive increases in base rate.
He said:
“I think we are much nearer now to the top of the cycle. And I’m not therefore saying we’re at the top of the cycle because we’ve got a meeting to come but I think we are much nearer to it on interest rates on the basis of current evidence.”
Governor Bailey also forecast that inflation, last recorded at 6.8% in July, will continue to fall this year, saying:
When I look at it today, many of the indicators are now moving as we would expect them to move and are signalling that the fall in inflation will continue and as I’ve said a number of times I think will be quite marked by the end of this year.”
“I should say possibly that we will get a tick up in the next release because fuel prices went down in August last year and went up a bit in August this year ... but I don’t that as a central change in the path.”
Sterling has dropped by over half a cent today to as low as $1.2483, the lowest since early June.
The pound extended losses to a three-month low as Bank of England Governor Andrew Bailey said the drop in UK inflation will be "quite marked"
— Bloomberg UK (@BloombergUK) September 6, 2023
Markets Today has more: https://t.co/B8sZlYciDA pic.twitter.com/z1xJI1PvWv
Bailey also told MPs that increasing diversity in the City will lead to better decisions.
In other news…
The British Chambers of Commerce has predicted that Britain will narrowly avoid a recession this year – but people and businesses will still feel the pain akin to the 2008 financial crash.
UK housebuilding has slumped, as high interest rates hit demand for homes.
NatWest bank has appointed a new chair, to succeed Sr Howard Davies, as it continues to deal with the fallout from the scandal surrounding the threatened closure of Nigel Farage’s bank accounts.
Rick Haythornthwaite – who previously chaired Network Rail and Mastercard as well as the British Gas owner and now leads the boardrooms of Ocado and the AA – will take over next year.
Here’s the rest of today’s business news:
Q: The UK statistics office has just revised up its estimate of UK growth since the pandemic began quite considerably – does that make the Bank’s job even harder?
Governor Bailey says there is always more uncertainty over GDP data because it is often revised.
The ONS’s revision help the Bank with its argument that the economy has been stronger than expected, Bailey adds.
