"Are You a CEO, Director, or Founder interested in a Feature Interview?"
All Interviews are 100% FREE of Charge
Inflation steadied at 2.2% last month, below the 2.4% forecast by the Bank of England, but will Threadneedle Street cut rates again today?
If interest rates are cut again, it will be a welcome move for property buyers, sellers and of course real estate agents.
UK estate agents are already reporting increased buyer interest following the Bank of England’s interest rate cut last month, with a significant increase in enquiries from buyers in recent weeks.
At its meeting last month, the Monetary Policy Committee voted narrowly 5-4 to cut interest rates to 5% from a 16-year high of 5.25%, but Governor Andrew Bailey stressed that borrowing costs would be reduced “prudently” going forward.
“Thursday’s base rate decision again divided opinion. Earlier this week, the market was expecting a 40% chance of a rate cut, but… [yesterday’s] Inflation data made that less likely.
“UK inflation was stable at 2.2% in August, but core inflation has surged to 3.6%. Taking this into account, committee members are likely to see this as sufficient reason to keep rates on hold, especially given that the Bank of England expects inflation to rise at the end of the year.”
Even if the Bank of England keeps its key interest rate at 5% today, many economists believe it will be cut in November.
In a Reuters poll last week, 49 of 65 economists, or nearly 80 percent, expected one more rate cut this year, compared with 48 who expected one in November and just one in December. The remaining 16 economists expected two more rate cuts this year.
But Julian Jessop, an IEA economic research fellow at the Institute for Economic Affairs, a free market think tank, says the Bank of England should not delay its next rate cut despite inflation running above target.
“The latest UK inflation data may not have tilted the balance towards a rate cut this week, but the case for further rate cuts remains strong,” he said.
“The headline interest rate remained at 2.2% in August, above the Monetary Policy Committee’s target of 2%. The core interest rate [excluding food and energy] It rose to 3.6% from 3.3% as services inflation surged again to 5.6% from 5.2%.
“However, most of the increase reflects higher airfares, which vary from year to year depending on the timing of school holidays. Services inflation is also lower than predicted in the Bank’s latest Monetary Policy Report. There are few signs of the ‘wage and price’ spiral that some on the Monetary Policy Committee fear.
“Higher domestic energy prices could cause headline inflation to spike in the autumn, but banks have already indicated they will ignore this temporary effect.
“The bigger picture is that the economy is slowing again, the labor market is cooling and interest rates are higher than necessary to keep inflation in check.”
Financial markets are citing about a one-quarter chance of a rate cut following Wednesday’s inflation data, up from a one-third chance the previous day.
"Elevate Your Brand with an Exclusive Feature Interview!"