Latest news with #RobertWood
Daily Mirror
16-06-2025
- Business
- Daily Mirror
Impact of Israel and Iran's war on interest rates for UK borrowers unveiled
The escalating conflict between Israel and Iran has already led to a spike in oil prices, and experts say it could result in higher inflation for UK borrowers the longer it continues The war between Israel and Iran could have a major impact on millions of British borrowers as it threatens to keep UK interest rates higher for longer, borrowers have been warned. A surge in oil prices on the back of the conflict risks pushing inflation back up, say economists. Oil has jumped from $65 (£47.81) a barrel to around $74 (£54.43) on Friday after missile strikes between the two countries, sparking fears of an escalation of the Middle East conflict. However, prices on Monday as it emerged the strikes had left oil production and export facilities unaffected. Nevertheless, concerns remain about ongoing uncertainty and the potential disruption to oil supplies. The Office for National Statistics will on Wednesday release inflation for May, after data for April revealed the Consumer Prices Index jumped back to 3.5%. Economists forecast CPI fell back last month, potentially to either 3.3% or 3.4%. But there are worries that higher oil prices feeding into inflation could delay the Bank of England - whose Monetary Policy Committee (MPC) votes on Thursday this week - will delay cutting its base rate from the current 4.25%. Pushing back the timing of another cut will be a setback for millions for UK homeowners hoping that borrowing costs will continue to fall, although it could be better for savers. Robert Wood, chief UK economist at consultants Pantheon Macroeconomics, said: 'Events in the Middle East driving up oil prices last week are a reminder of just how close to the wind the MPC is sailing.' He added: 'We find it far from implausible that inflation ends next year above 3% if events in the Middle East worsen, or a cold winter boosts natural gas prices.' Mr Wood warned a jump in oil - and wholesale gas - prices could in turn lead to workers demanding higher pay rises to offset increased living costs. Most economists don't think the MPC will cut rates this week, with the next reduction potentially in August. Mr Wood said: 'We are comfortable assuming only one more rate cut this year, even if right now August appears to be a better bet than our forecast for November.' Jens Larsen, a former Bank of England official who now at the Eurasia Group consultancy, told the Financial Times: 'The Bank of England has said it will respond to the volatile geopolitical environment and repeated shocks by making greater use of scenarios to communicate all the uncertainty out there. But so far this is very much a work in progress. It is hard to discern a clear narrative from the BoE on the outlook - they can't afford to just throw up their hands and say they have no idea what is going on.' Enrique Diaz-Alvarez, chief economist at global financial services firm Ebury, said: 'The Bank of England is expected to hold rates steady this week, but absent a strong inflation report the MPC may well signal that the next cut could come in the summer.
Yahoo
16-06-2025
- Business
- Yahoo
Bank of England urged to put brakes on rate cuts over Iran conflict
Israel's war with Iran threatens to keep interest rates higher for longer as the Bank of England struggles to control inflation, economists have warned. A surge in oil prices since Israel struck Iran risks reigniting inflation and has exposed the vulnerability of the Bank's forecasts, said Robert Wood, at Pantheon Macroeconomics. 'Events in the Middle East driving up oil prices last week are a reminder of just how close to the wind the MPC [Monetary Policy Committee] is sailing,' he said. Oil prices have risen from $65 per barrel to around $74 over the last week in a move that threatens to push British inflation closer to 4pc this year, double the Bank's 2pc target. Mr Wood warned that the jump in energy costs could also ignite another wage-price spiral, as workers demand bigger pay packets to compensate for higher bills. Andrew Bailey, the Bank's Governor, and the rest of the MPC are expected to keep rates on hold at 4.25pc on Thursday before cutting borrowing costs in August to take the headline rate to 4pc. Investors currently expect the Bank to eventually take the base rate down to 3.5pc over the next year. However, Mr Wood warned that events in the Middle East could force officials to hold borrowing costs at 4pc to stop inflation from spreading through the economy. 'We find it far from implausible that inflation ends next year above 3pc if events in the Middle East worsen, or a cold winter boosts natural gas prices,' Mr Wood said. Inflation rose to 3.4pc in April, the highest level in more than a year. George Buckley, economist at Nomura, said: 'We have had an energy shock in the past and look where it led us: to a whopping increase in inflation across the board, not just for energy, which did require a monetary policy response.' However, Mr Buckley said the impact of conflict in the Middle East may be mixed, with higher oil prices leading to more expensive petrol, but also potentially prompting businesses to hold off investment. This would slow the economy and reduce upward pressure on inflation. The economy shrank in April and the job market has shown signs of weakness, meaning the Bank's officials face conflicting signals that make it harder to decide the most appropriate level of interest rates. Michel Nies, at Citi, said the conflict 'and the associated changes in energy prices, shipping costs and risk sentiment will remind MPC members of the volatility and unpredictability of the operating environment'. He said it may push some MPC members who voted to cut rates in May to prompt for a pause this week. 'It is possible that some of the more hawkishly minded members within the group of five that voted for a 0.25 percentage point cut recalibrate to a more neutral position, more truly in line with 'gradual and careful',' he said, referring to Mr Bailey's guidance on the pace of future changes in rates. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Telegraph
16-06-2025
- Business
- Telegraph
Bank of England urged to put brakes on rate cuts over Iran conflict
Israel's war with Iran threatens to keep interest rates higher for longer as the Bank of England struggles to control inflation, economists have warned. A surge in oil prices since Israel struck Iran risks reigniting inflation and has exposed the vulnerability of the Bank's forecasts, said Robert Wood, at Pantheon Macroeconomics. 'Events in the Middle East driving up oil prices last week are a reminder of just how close to the wind the MPC [Monetary Policy Committee] is sailing,' he said. Oil prices have risen from $65 per barrel to around $74 over the last week in a move that threatens to push British inflation closer to 4pc this year, double the Bank's 2pc target. Mr Wood warned that the jump in energy costs could also ignite another wage-price spiral, as workers demand bigger pay packets to compensate for higher bills. Andrew Bailey, the Bank's Governor, and the rest of the MPC are expected to keep rates on hold at 4.25pc on Thursday before cutting borrowing costs in August to take the headline rate to 4pc. Mixed bag Investors currently expect the Bank to eventually take the base rate down to 3.5pc over the next year. However, Mr Wood warned that events in the Middle East could force officials to hold borrowing costs at 4pc to stop inflation from spreading through the economy. 'We find it far from implausible that inflation ends next year above 3pc if events in the Middle East worsen, or a cold winter boosts natural gas prices,' Mr Wood said. Inflation rose to 3.4pc in April, the highest level in more than a year. George Buckley, economist at Nomura, said: 'We have had an energy shock in the past and look where it led us: to a whopping increase in inflation across the board, not just for energy, which did require a monetary policy response.' However, Mr Buckley said the impact of conflict in the Middle East may be mixed, with higher oil prices leading to more expensive petrol, but also potentially prompting businesses to hold off investment. This would slow the economy and reduce upward pressure on inflation. The economy shrank in April and the job market has shown signs of weakness, meaning the Bank's officials face conflicting signals that make it harder to decide the most appropriate level of interest rates. Michel Nies, at Citi, said the conflict 'and the associated changes in energy prices, shipping costs and risk sentiment will remind MPC members of the volatility and unpredictability of the operating environment'. He said it may push some MPC members who voted to cut rates in May to prompt for a pause this week. 'It is possible that some of the more hawkishly minded members within the group of five that voted for a 0.25 percentage point cut recalibrate to a more neutral position, more truly in line with 'gradual and careful',' he said, referring to Mr Bailey's guidance on the pace of future changes in rates.
Spectator
05-06-2025
- Automotive
- Spectator
The ONS blunders. Again
'The ONS apologises for any inconvenience caused' is becoming an all-too-familiar refrain from Britain's statisticians. The latest mea culpa came after a blunder involving vehicle tax data led the Office for National Statistics to overstate April's inflation figure. Initially reported as 3.5 per cent, the true figure was 3.4 per cent – only revealed once the Department for Transport corrected its own error on the number of cars subject to increased vehicle taxes. While civil servants at the DfT are to blame, it raises serious questions about the ONS's quality assurance process. Robert Wood, chief economist at Pantheon Macroeconomics, said it was obvious there had been an error as soon as the figures were published last month. When asked by The Spectator this morning at an event to relaunch the Conservatives' economic policy, shadow chancellor Mel Stride called the mistake 'thoroughly reprehensible'.
Yahoo
27-05-2025
- Business
- Yahoo
Odds of more Bank of England interest rate cuts fall as food inflation rises
The Bank of England's (BoE) readiness to cut interest rates further has been put into further doubt as food inflation in the UK has risen for the fourth month in a row, in yet another sign of sticky inflation. The annual rate of food price rises hit 2.8% this month, after a 2.6% rise in April, according to the latest shop price data from the British Retail Consortium (BRC). Analysts at Pantheon Macroeconomics argued that persistent inflation and a sharp rise in the minimum wage will likely keep the BoE from cutting interest rates at the current rate. The central bank's base rate currently stands at 4.25% following a 25 basis point cut earlier this month. 'The UK environment is more inflationary than before the pandemic. Only one more rate cut this year looks fair,' said Robert Wood and Elliott Jordan-Doak at Pantheon. Read more: Gold prices fall after Trump delays EU tariffs The primary inflation measure, the consumer price index (CPI), stood at 3.5% in the 12 months to April, a higher-than-expected increase from the previous month. That means price increases are moving away from the BoE's 2% target. Barclays (BARC.L) has also revised its interest rate forecasts following the higher-than-expected inflation data. The bank no longer expects the BoE to cut rates in June and now predicts the base rate will drop to 3.5 % by February 2026, rather than by the end of this year as previously forecast. Huw Pill, who voted against the BoE's decision earlier this month to lower the base rate by 25 basis points to 4.25%, has previously said that Threadneedle has been cutting rates too quickly, given the inflation outlook. 'I remain concerned about upside risks to the achievement of the inflation target," he said. Clare Lombardelli, deputy governor of the BoE, and Megan Greene, an external member of the Bank's monetary policy committee (MPC), both said that while they supported the decision to lower interest rates to 4.25%, they were reluctant to take further action without more evident signs of inflation subsiding. 'I don't think we can pull out the ticker tape and suggest it [inflation] is transitory,' Greene said. 'There is still reason to be concerned about inflation persistence.' Read more: Trending tickers: Tesla, Nvidia, GameStop, Palantir and Whitbread The uptick in grocery inflation was primarily driven by higher fresh food prices, which rose by 2.4% compared with 1.8% the previous month. In contrast, ambient food inflation cooled slightly, falling to 3.3% from 3.6% in April. 'While overall shop prices remain unchanged in May, food inflation rose for the fourth consecutive month,' said Helen Dickinson, chief executive of the BRC. 'Fresh foods were the main driver, and red meat eaters may have noticed their steak got a little more expensive as wholesale beef prices increased.' Despite the increase in food prices, overall shop prices remained 0.1% lower than a year ago—unchanged from April—reflecting continued deflation in non-food goods. Non-food prices declined by 1.5% in the year to May, deepening from the 1.4% drop seen in April. Electrical goods in particular saw faster price falls, with retailers ramping up promotions to boost sales ahead of potential disruption from US tariffs. 'Prices fell faster for electricals as retailers tried to encourage spending before any potential knock-on impact from US tariffs,' the BRC in to access your portfolio
