rtmark
LearnBonds.com

Bank of England rate cut on ‘knife-edge’

Bank of England governor Mark Carney

Economists say the decision by the Bank of England to cut interest rates this week sits on a ‘knife-edge’.

Mixed economic data will strengthen the arguments of hawks on the Bank’s nine-strong Monetary Policy Committee (MPC) when they meet on Thursday, with financial markets pricing in a 60 per cent chance of a reduction.

A cut from the UK’s rate’s current 0.75 per cent to 0.5 per cent, would see the country’s headline borrowing rate fall to a two-year low.

Mark Gregory, UK chief economist at Ernst & Young, said: “The decision looks to be on a knife-edge and is very hard to call.”

 

Hard call for Bank

This key rate affects the cost of personal loans, credit card rates in the UK, as well as the price of loans and bonds to large corporations and small firms.

At the last meeting in November, the MPC voted 7-2 in favour of keeping rates at 0.75 per cent, meaning that only three votes need to swing to drive through a cut.

Investec chief economist Philip Shaw said the decision was “the least predictable for some time”.

A rate reduction would hurt long-suffering savers who struggle to find low-risk saving accounts able to beat the current level of inflation at 1.3 per cent, but would be a boost to borrowers slashing the cost of mortgages even further.

 

Conflicting data

Business confidence initially rose following the Conservatives mid-December election victory. However, official monthly growth figures showed gross domestic product unexpectedly fell by 0.3 per cent in November after a weak performance in the manufacturing sector.

This was followed by data showing inflation tumbling to a three-year low of 1.3 per cent in December.

Bank of England governor Mark Carney (pictured, centre), said that interest rates might be cut if economic performance remains weak. And both external MPC members Gertjan Vlieghe and Silvana Tenreyro have hinted that they could vote for a cut if data doesn’t show an improvement in the economy since December’s election.

But more recently, the UK’s unemployment rate remains at mid-1970s lows, while the preliminary reading for purchasing managers index showed Britain’s private sector returned to growth for the first time in five months in January.

 

Swing votes

Economists at Bank of America said they now expect the MPC to cut rates this week having previously thought the Bank would wait until May.

But ING developed markets economist James Smith forecasts rates will be held on Thursday, with a maximum of four MPC members voting for a cut.

“It’s a close call, but a recent post-election pick up in sentiment should be enough to see the Bank of England avoid cutting interest rates this month,” he added.

 

 

 

 

 

 

 

 

Trusted & Regulated Stock & CFD Brokers

Rating

What we like

  • 0% Fees on Stocks
  • 5000+ Stocks, ETFs and other Markets
  • Accepts Paypal Deposits

Min Deposit

$200

Charge per Trade

Zero Commission

Rating

64 traders signed up today

Visit Now

75% of investors lose money when trading CFDs.

Available Assets

  • Total Number of Stocks & Shares5000+
  • US Stocks
  • German Stocks
  • UK Stocks
  • European
  • ETF Stocks
  • IPO
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 Zero Commission
  • NASDAQ Zero Commission
  • DAX Zero Commission
  • Facebook Zero Commission
  • Alphabet Zero Commission
  • Tesla Zero Commission
  • Apple Zero Commission
  • Microsoft Zero Commission

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
  • Paypall
  • Skrill
  • Neteller

Rating

What we like

  • Sign up today and get $5 free
  • Fractals Available
  • Paypal Available

Min Deposit

$0

Charge per Trade

$1 to $9 PCM

Rating

Visit Now

Investing in financial markets carries risk, you have the potential to lose your total investment.

Available Assets

  • Total Number of Shares999
  • US Stocks
  • German Stocks
  • UK Stocks
  • European Stocks
  • EFTs
  • IPOs
  • Funds
  • Bonds
  • Options
  • Futures
  • CFDs
  • Crypto

Charge per Trade

  • FTSE 100 $1 - $9 per month
  • NASDAQ $1 - $9 per month
  • DAX $1 - $9 per month
  • Facebook $1 - $9 per month
  • Alphabet $1 - $9 per month
  • Telsa $1 - $9 per month
  • Apple $1 - $9 per month
  • Microsoft $1 - $9 per month

Deposit Method

  • Wire Transfer
  • Credit Cards
  • Bank Account
Users should remember that all trading carries risks and users should only invest in regulated firms. Views expressed are those of the writers only. Past performance is no guarantee of future results. The opinions expressed in this Site do not constitute investment advice and independent financial advice should be sought where appropriate. This website is free for you to use but we may receive commission from the companies we feature on this site.
Roger Baird

Roger Baird is News Editor at Finixio. He has worked as a financial journalist for 20 years reporting on companies, capital markets and the UK economy.