Latest news with #SurenThiru
Yahoo
5 days ago
- Business
- Yahoo
Markets bet on August interest rate cut after unemployment rose to a four-year high
Investors remain confident that the Bank of England (BoE) will cut interest rates next month after unemployment rose to a four-year high. This Thursday, data from the Office for National Statistics (ONS) showed the UK jobs market continued to cool in May, with unemployment ticking higher and pay growth slowing. The rate of unemployment rose to 4.7% in the March to May period, up from 4.6% for the three months to April. The number of employees on the payroll in May was down by 25,000 on the month, though this was lower than a previous estimate of 109,000 and less than a decline of 55,000 in April. The data is likely to cement the case for the Bank of England to cut interest rates next month in a bid to boost the economy. Since its first quarter-point rate cut last August from the 16-year high of 5.25%, the Bank of England has been cautious, reducing interest rates every three months to the current 4.25%. Read more: UK inflation unexpectedly rises in June on higher fuel prices The Office for National Statistics (ONS) said consumer prices rose by an annual rate of 3.6% in June, up from 3.4% in May. That was the highest rate since January 2024. The ONS added that higher food prices were primarily behind the increase. Fuel and transport costs also contributed. Money markets indicate there is an 89% chance that policymakers will lower borrowing costs in August, up from an 87% probability on Wednesday. Suren Thiru, economics director at ICAEW, said: 'June's uptick is the start of a slight summer surge in inflation with skyrocketing business costs and global trade turbulence likely to lift the headline rate moderately higher by the autumn, despite July's drop in energy bills. 'While June's hot inflation won't deter policymakers from sanctioning an August policy loosening, given mounting worries over economic conditions, these figures may increase caution over the pace of future rate cuts.' Services inflation, a measure the central bank views as a better guide to domestically generated price pressures than the headline rate, held steady at 4.7% in June. Read more: UK jobs market continues to cool, pay growth slows Sanjay Sanjay, Deutsche Bank's chief UK economist, said: 'A 'gradual and careful' approach seems appropriate for now. And we do not think that the bar for faster rate cuts has been met just yet. 'The labour market is loosening, but perhaps not as fast as the unrevised payroll data suggested.' Last month, the central bank's Monetary Policy Committee (MPC) voted six to three to keep rates unchanged at 4.25%, following a quarter-point cut in May. The MPC, which has an inflation target of 2%, has reduced interest rates four times since last summer. Chris Beauchamp, chief market analyst at IG, said: "[Wednesday's] CPI data spells more pressure for consumers thanks to the surge in food prices, but the overall picture doesn't quite spell the end for any further rate cuts. "Core goods and services inflation was broadly contained, and the focus shifts now to the job numbers tomorrow to see if there are further signs of weakness that might keep the Bank of England on course to ease policy in upcoming meetings." Traders are betting on lower borrowing costs in August but are no longer pricing in a second cut before the end of the year, although derivates trades indicate this scenario is still considered likely. Read more: Bank of England could cut interest rates faster if jobs market slows, Bailey says Isaac Stell, investment manager at the investment service Wealth Club, said: "The surprising strength of the inflation figures adds additional issues to the UK's mounting economic woes. All eyes will turn to the Bank of England who have indicated they are willing to cut rates given the cooling in the jobs market but are unlikely to be able to justify a cut when inflation has started to run hot once again. "In the absence of interest rate cuts, consumers are likely to feel a continued squeeze, unhelpful for the government's growth agenda which has yet to show signs of life itself. Awful April has rolled into miserable May and in turn rolled into joyless June. The government will now pin its hopes on a Jubilant July." Andrew Sentance, who sat on the Monetary Policy Committee from 2006 to 2011, said it would be 'irresponsible' for it to cut interest rates after the jump in inflation. Bank governor Andrew Bailey said in an interview with The Times newspaper earlier this week that rates could be cut further if the jobs market slows down, saying 'I really do believe the path is downward'. Yael Selfin, Chief Economist at KPMG UK, said slowing pay growth had 'opened the door' for an interest rate cut in August'. She said: 'Slowing activity in the labour market, coupled with pay pressures easing, will likely prompt the Bank of England to lower interest rates next month. 'The impact of April's tax and administrative changes has led to a marked slowdown in hiring activity among firms. Read more: FTSE 100 LIVE: Stocks higher as UK unemployment hits four-year high and wage growth slows 'With domestic activity remaining sluggish, the MPC will likely want to provide support via looser policy to prevent a more significant deterioration in the labour market.' Sarah Coles, head of personal finance at Hargreaves Lansdown and Yahoo Finance UK personal finance columnist, 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 mean it can cut rates sooner rather than later." The Bank of England will announce its decision on interest rates on 7 August around 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
Yahoo
6 days ago
- Business
- Yahoo
Markets bet on August interest rate cut despite surprise inflation jump
Investors remain confident that the Bank of England (BoE) will cut interest rates next month, even as UK inflation rose unexpectedly to a near 18-month high in June as food and fuel prices surged. Though inflation remains well above the Bank of England's target rate of 2%, most economists think the central bank will cut interest rates again at its next meeting on 7 August. Since its first quarter-point rate cut last August from the 16-year high of 5.25%, the Bank of England has been cautious, reducing interest rates every three months to the current 4.25%. Read more: UK inflation unexpectedly rises in June on higher fuel prices The Office for National Statistics (ONS) said consumer prices rose by an annual rate of 3.6% in June, up from 3.4% in May. That was the highest rate since January 2024. The ONS added that higher food prices were primarily behind the increase. Fuel and transport costs also contributed. Money markets indicate there is an 87% chance that policymakers will lower borrowing costs in August, down from an 89% probability on Tuesday. Suren Thiru, economics director at ICAEW, said: 'June's uptick is the start of a slight summer surge in inflation with skyrocketing business costs and global trade turbulence likely to lift the headline rate moderately higher by the autumn, despite July's drop in energy bills. 'While June's hot inflation won't deter policymakers from sanctioning an August policy loosening, given mounting worries over economic conditions, these figures may increase caution over the pace of future rate cuts.' Services inflation, a measure the central bank views as a better guide to domestically generated price pressures than the headline rate, held steady at 4.7% in June. Read more: FTSE 100 LIVE: Stocks muted as UK inflation unexpectedly jumps to highest since January 2024 Sanjay Sanjay, Deutsche Bank's chief UK economist, said: "Is an August rate cut in jeopardy? No, we don't think so. There's enough of a slowdown in GDP and the labour market to warrant a 'gradual and careful' easing of monetary policy. But the onus now rests on the labour market to shape how far and how fast the MPC can cut this year and next." Last month, the central bank's Monetary Policy Committee (MPC) voted six to three to keep rates unchanged at 4.25%, following a quarter-point cut in May. The MPC, which has an inflation target of 2%, has reduced interest rates four times since last summer. Chris Beauchamp, chief market analyst at IG, said: "Today's CPI data spells more pressure for consumers thanks to the surge in food prices, but the overall picture doesn't quite spell the end for any further rate cuts. "Core goods and services inflation was broadly contained, and the focus shifts now to the job numbers tomorrow to see if there are further signs of weakness that might keep the Bank of England on course to ease policy in upcoming meetings." Markets are betting the BoE will cut rates one more time by the end of the year. However, the latest inflation figures still represents a setback for policymakers at Threadneedle Street. Read more: Bank of England could cut interest rates faster if jobs market slows, Bailey says Isaac Stell, investment manager at the investment service Wealth Club, said: "The surprising strength of the inflation figures adds additional issues to the UK's mounting economic woes. All eyes will turn to the Bank of England who have indicated they are willing to cut rates given the cooling in the jobs market but are unlikely to be able to justify a cut when inflation has started to run hot once again. "In the absence of interest rate cuts, consumers are likely to feel a continued squeeze, unhelpful for the government's growth agenda which has yet to show signs of life itself. Awful April has rolled into miserable May and in turn rolled into joyless June. The government will now pin its hopes on a Jubilant July." Andrew Sentance, who sat on the Monetary Policy Committee from 2006 to 2011, said it would be 'irresponsible' for it to cut interest rates after the jump in inflation. Bank governor Andrew Bailey said in an interview with The Times newspaper earlier this week that rates could be cut further if the jobs market slows down, saying 'I really do believe the path is downward'. The UK labour market statistics will be published this Thursday at 7am in London. The Bank of England will announce its decision on interest rates on 7 August around noon.
Yahoo
6 days ago
- Business
- Yahoo
UK inflation rises by more than expected and may slow down rate cuts
LONDON (AP) — UK inflation rose to a near 18-month high in June as food prices surged for the third month running, official figures showed Wednesday. Economists said the unexpected increase could prompt the Bank of England to lower interest rates slower than currently anticipated. The Office for National Statistics said consumer prices rose by an annual rate of 3.6% in June, up from 3.4% in May. That was the highest rate since January 2024. The statistics agency said higher food prices was largely behind the increase. Fuel and transport costs also contributed. Though inflation remains way above the Bank of England's target rate of 2%, most economists think the central bank will opt to cut interest rates again at its next meeting on Aug. 7 as sluggish economic growth is anticipated to weigh on prices over the coming year or two. Since its first quarter-point rate cut last August from the 16-year high of 5.25%, the Bank of England has played it steady, reducing interest rates every three months to the current 4.25%. However, some economists believe the higher inflation rate may cause some jitters among rate-setters, which could see the bank delay further reductions. 'While June's hot inflation won't deter policymakers from sanctioning an August policy loosening, given mounting worries over economic conditions, these figures may increase caution over the pace of future rate cuts,' said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales. 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
Washington Post
6 days ago
- Business
- Washington Post
UK inflation rises by more than expected and may slow down rate cuts
LONDON — UK inflation rose to a near 18-month high in June as food prices surged for the third month running, official figures showed Wednesday. Economists said the unexpected increase could prompt the Bank of England to lower interest rates slower than currently anticipated. The Office for National Statistics said consumer prices rose by an annual rate of 3.6% in June, up from 3.4% in May. That was the highest rate since January 2024. The statistics agency said higher food prices was largely behind the increase. Fuel and transport costs also contributed. Though inflation remains way above the Bank of England's target rate of 2%, most economists think the central bank will opt to cut interest rates again at its next meeting on Aug. 7 as sluggish economic growth is anticipated to weigh on prices over the coming year or two. Since its first quarter-point rate cut last August from the 16-year high of 5.25%, the Bank of England has played it steady, reducing interest rates every three months to the current 4.25%. However, some economists believe the higher inflation rate may cause some jitters among rate-setters, which could see the bank delay further reductions. 'While June's hot inflation won't deter policymakers from sanctioning an August policy loosening, given mounting worries over economic conditions, these figures may increase caution over the pace of future rate cuts,' said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.
Associated Press
6 days ago
- Business
- Associated Press
UK inflation rises by more than expected and may slow down rate cuts
LONDON (AP) — UK inflation rose to a near 18-month high in June as food prices surged for the third month running, official figures showed Wednesday. Economists said the unexpected increase could prompt the Bank of England to lower interest rates slower than currently anticipated. The Office for National Statistics said consumer prices rose by an annual rate of 3.6% in June, up from 3.4% in May. That was the highest rate since January 2024. The statistics agency said higher food prices was largely behind the increase. Fuel and transport costs also contributed. Though inflation remains way above the Bank of England's target rate of 2%, most economists think the central bank will opt to cut interest rates again at its next meeting on Aug. 7 as sluggish economic growth is anticipated to weigh on prices over the coming year or two. Since its first quarter-point rate cut last August from the 16-year high of 5.25%, the Bank of England has played it steady, reducing interest rates every three months to the current 4.25%. However, some economists believe the higher inflation rate may cause some jitters among rate-setters, which could see the bank delay further reductions. 'While June's hot inflation won't deter policymakers from sanctioning an August policy loosening, given mounting worries over economic conditions, these figures may increase caution over the pace of future rate cuts,' said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.
