An interest rate cut from the Bank of England in August looks a “near certainty” after new figures showed unemployment rising and pay growth slowing, economists say.
Financial markets had already expected the Bank’s Monetary Policy Committee (MPC) to reduce rates from 4.25 per cent to 4 per cent next month, but the latest figures make this more likely.
The Bank tends to cut rates in response to falling inflation, but although figures released on Wednesday show inflation rising to 3.6 per cent, experts say the poor jobs data will counteract price rises.
This is because high interest rates can weigh down the economy, and exacerbate problems with employment.
The unemployment rate rose to 4.7 per cent, its highest since 2021, although the Office for National Statistics (ONS) has said the figure needs to be treated with caution due to issues with how the data is collected.
square PROPERTY AND MORTGAGES Barclays launches cheapest mortgage rate at 3.75% - but here's the catch
Read More
Interest rates falling in August will not have a huge impact on most rates for fixed mortgages because lenders have already priced a cut in, but it will mean those on tracker and variable deals see their costs fall.
Asked if an August cut was a “near certainty” after Thursday’s figures on jobs and growth, Michael Saunders, a former MPC member and now adviser at Oxford Economics, said: “Yes, as things stand, but still [more] data to go.
“I’m projecting two cuts this year, August and November, prompted especially by weakening labour market and lower pay growth.”
Sanjay Raja, chief UK economist at Deutsche Bank Research, has also previously predicted that there will be a fall in interest rates next month.
Responding to Thursday’s data, he said: “For the MPC, despite the bump higher in inflation, the loosening in labour market should give the Bank reason to proceed with a gradual dial down of restrictive policy.
“A gradual and careful approach [to cutting rates] seems appropriate for now.”
Forecaster Pantheon Macroeconomics said in a note that although it thought the Bank should keep inflation on hold, it now believed it would cut rates in August.”There is probably just enough in the labour market data to push for an insurance cut,” it said.
“We also have to take into account the scant push-back from rate setters to the near-90 per cent probability of an August rate cut priced by the market.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The Bank of England was hoping for bad news from the labour market, and it got what it wanted: wage growth has slowed and unemployment has risen again.
“For the Bank, this is a sign of growing slack in the labour market, which is likely to ease inflationary pressures, and means it can cut rates sooner rather than later.”
Just days ago, the Governor of the Bank of England Andrew Bailey said that the Bank was prepared to make larger interest rate cuts if it sees that the job market is slowing.
Liz McKeown, ONS director of economic statistics, said: “The labour market continues to weaken, with the number of employees on payroll falling again, though revised tax data shows the decline in recent months is less pronounced than previously estimated.
“Pay growth fell again in both cash and real terms, but both measures remain relatively strong by historic standards.”
Hence then, the article about august interest rate cut a near certainty after worst unemployment in four years was published today ( ) and is available on inews ( Middle East ) The editorial team at PressBee has edited and verified it, and it may have been modified, fully republished, or quoted. You can read and follow the updates of this news or article from its original source.
Read More Details
Finally We wish PressBee provided you with enough information of ( August interest rate cut a ‘near certainty’ after worst unemployment in four years )
Also on site :
- Country Star Looks Nearly Unrecognizable After Debuting Bold New Look at the iHeartRadio Music Awards
- 7 Books To Read After 'Heated Rivalry,' According to a Librarian
- Anthropologie’s Sparkly $13 Pave Heart Stud Earrings Are Perfect for Everyday Wear and Spring Occasions