The Telegraph has just reported:
The Bank of England has cut interest rates to their lowest level in more than two years as policymakers seek to revive Britain's sluggish economy.
Policymakers on the Bank's Monetary Policy Committee (MPC) cut the base rate from 4.25pc to 4pc on Thursday in a move that is expected to lower borrowing costs for mortgage holders.
It is the MPC's fifth cut since last August and rates are now at their lowest level since March 2023.
My reaction: this is too little, too late to deal with the problems that our economy is facing. So very Bank of England, then.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
You wrote yesterday of the ability for the government to save £15bn by not paying interest on reserves resulting from quantitative easing. What would the savings be if they instructed the BoE to reduce interest rates to, say, 2%? Presumably that would wipe out any “black hole” with the savings on “debt” interest repayments?
No
But the savings could reach £20bn
Banks, big business, politicians and the ‘great and good’ are a chumocracy, an old boys network so expecting crooks and the corrupt to act in any way openly or in favour of anyone but themselves is rather wishful thinking.
The whole system of government, finance, business and the way we do things in the UK isn’t fit for purpose. It is not working for the majority. The redistribution of the wealth, the share of the national pie, has to be the first thing on any agenda. My view is that it is better to sort these things out now than have a reckoning later. We might then talk about land reform, things like the leasehold and freehold system and how power is often wielded extremely injudiciously in the UK.
I’ve said this before many times on other blogs and forums and I’ll say it again. If things do not get better for the rest of us, it will certainly get worse possibly to the point of serious civil disturbances and strikes and civil disobedience. Now, my view is that to avoid all that possible unpleasantness and recrimination, the powers-that-be come to terms with the notions of social justice and, once more, morality in politics, business and general civil society should be at the forefront of life again, as Richard has written, a ‘politics of care’. Who knows, we might stave off societal collapse or something worse??
And Rachel from accounts get very excited and comes out with a load of BS about it being due to them bringing stability to the economy – enough BS to feed every garden in the UK several times over.
Craig
Particularly absurd when the real reason is the BoE is sh*t scared of Trump.
Richard, not being facetious here, but perhaps you could actually do a few pie charts to show who owns the most wealth, who gets taxed the most and how that pie is shared out. Just some thoughts.
Maybe…
Just curious Richard, could you elaborate on why the BoE are scared of Trump? Thanks.
Tariffs and their impact on the UK economy.
I do think it’s better to navigate a bit ahead with some caution given the turbulent times and it’s a little soon, I feel it is a little risky as markets aren’t always stable now, but I will take any wins possible. In fact, it’s a just and fair win from the Labour party. I’ll take anything over the conservatives that bark about everything but never bite. I don’t even think conservatives did anything worth. They should never ever be trusted, I am 20 y/o and have barely seen them pass actually good laws.
How fast should the bank of England cut interest rates? I heard there was even a vote for 0.5% cut to make it 3.75% but I don’t know what would be the ideal rate without things suddenly blowing up.
Off topic, but I am glad that you did come out with some of your criticism against Gary. No offense to him, I’m sure his heart is in the right place, but some of his points fell flat imo, and their thought that the government could ‘run out of money’ seemed to stoke fear.
And the Bond market carries on, for example paying out tens of billions to wealthy overseas bond holders while the overseas aid budget, already pitifully small, goes on reducing, further entrenching inequality under the guise of fiscal responsibility.
If this is a duplicate I apologize. New to site came across this through someone mentioning you on r/ukpolitics on Reddit about your analysis on Gary’s video, I liked it. I feel sad because his heart is in the right place, but his points or aren’t good.
Anyways: Considering how unstable the economy is right now, especially globally, I’d rather it be a little slow. I think Labour should do more, but I am somewhat happy about them overall, do think there’s a bit much criticism from media after 14 years of Tories. As a 20 years old person, I have rarely if ever seen rightwing pass actually good laws, so I cannot trust them. What interest rate do you think is healthy? How fast should it be? I heard there was someone voting for a 0.5% interest cut.
The rate now should be a bit under 3% given where we are, where inflation is, and the risks we face, and might need to go lower still.
MPC Committee: Bank of England. Unthreading Needle Street. Earlier this week.
Drone 1: you know I always thought that yellow and blue deck chairs go quite well together
Drone 2: actually odl chap I like white, red and blue – more partriotic don’t you think obvs ordered in sequence
Drone 3: well for me well mixed stripes always looks gay
Drone 4: I say chaps did you see that UK industrial indicies are down again today @ their lowest level ever…..
Drones 1, 2 & 3 to D4: “what’s an industry indicies?”
my (ex) husband was at some point a consultant with the BoE (but not for long) – I did query some of his ‘results’ — but then he was an out of work banker and he needed work so — , what can we now expect? – I remember holding a conversation with the boss of a foreign bank (French speaking/Egypt) who took more note of me than of my husband ‘consultant’ – but I spoke the language and I did not shout slowly and loudly at these very intelligent people — I have had little respect for the BoE since — but — if they employ such – on récolte ce qu’on a semé –
Talking about King Donald it appears that for however long he is in power tariffs are set to stay.
Why? Because the money raised by tariffs, payable by the US consumer, is going to cover the “cost of his Big Beautiful Bill”.
He thinks that this is brilliant.
Any sensible non US company should pivot away from the US market and concentrate elsewhere.
Any sensible country should be looking to have sensible trade agreements with any country but the USA.
‘The lowest level in more than 2 years’.
The way in which this implies that we should be so grateful is beyond me…………………..
Wow! A whole 0.25%. Huge huge drop in my mortgage. I shall be rich as Croesus. I’ll have a party. Maybe buy me a boat.
No wait – I have a fixed rate mortgage.
Dang.
Bad luck…
And this is why all of this interest rate nonsense makes so little difference right now.
I agree, the BoE policy has consistently seemed to be to copy the Federal Reserve too little too late.
Except at the moment the Fed has good reason for being cautious with the Trump government actions seemingly designed to raise inflation and collapse the economy.
I really cannot see why Central Bank interest rates (commercial rates will differ) should ever differ much from inflation rates, slightly more if they worry about inflation rising (but it is coming down in the UK) and slightly less if they want to incentivise growth (which is what the Chancellor is talking about). But no doubt Richard will put me right!
Why do we need to bother about interest rates changing due to the BoE MPC?
Commercial rates for loans eg car loans, credit cards bear little relationship to CPI changes or BoE interest rate ones.
If inflation is due external factors like oil price rises or for that matter money supply increases why bother changing interest rates?
All the latter seems to do is to:
1.allow banks to reprice collateral based loans.
2. move money from debtors to creditors.
3. Allow big corporations to increase prices and protect or enhance profits.
4. Create under employment or unemployment.
5. Drive businesses out of business.
All this damage for ordinary folk to control inflation?
There has to be a better way?
The rate set by the Bank of England does influence real rates – and government cost, so there is reason for a base rate, I promise you.
Richard,
I do understand that a base interest rate is needed but I am taking issue with using it as the weapon of choice against inflation because raising the rates causes such widespread harm.
The weapon of choice must be tax. I agree.