Bank of England to impose another interest rate hike as UK inflation proves stubborn
The Bank of England is set to impose another interest rate hike on the UK economy today – the 12th consecutive increase in its battle to curb rampant inflation.
Both financial markets and economists widely expect a 0.25 percentage point rise to 4.5%.
The Bank Rate had stood at 0.1% in December 2021 before the tightening cycle began to tackle the pace of price rises, which were initially caused by economies getting back in gear after the COVID pandemic.
Russia’s invasion of Ukraine the following February then exacerbated the inflation problem, with soaring energy costs piling additional misery on Western nations.
Those considerable extra costs, faced by households and businesses alike, are still filtering through in the form of stubborn inflation for many goods and services despite wholesale energy costs easing in recent months.
The latest official figures showed the headline consumer prices index (CPI) measure at 10.1% – fed by the highest grocery inflation for 45 years.
The Bank is also likely concerned that higher-than-expected wage increases will embed inflation in the economy over the months ahead.
But there is good news on the CPI number just around the corner.
The inflation data for April is set to strip out the effects of the leap in household energy bills seen in April 2022 while the cost of fuel, which was also on the march at that time, is now well down on the levels seen in the same month a year ago.
Some economists predict a CPI number for April below 8% just because of the energy impact alone.
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This does not mean that prices are necessarily coming down and the cost of living crisis is over.
It is just that the contributions to inflation from the energy components are not so severe when it comes to measuring the pace of price increases over a 12-month period.
Raising Bank Rate – the Bank of England’s base interest rate – is a tool to reduce demand in the economy.
The rises are intended to cool activity and help inflation ease back towards the Bank’s 2% target.
But there are consequences.
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April: Another interest rate rise ‘almost a done deal’
Chief among them is the impact on borrowers, especially households on variable mortgage deals or those who have had to secure a new fixed deal over the past year.
According to research by TotallyMoney and Moneycomms, a further quarter-point interest rate rise will add £26 to monthly repayments for variable customers on the average UK property costing £270,708 with a 75% loan-to-value ratio.
The Bank rate increases, they said, meant the same customers were now facing forking out an extra £482 per month compared to pre-December 2021.
The Bank is mindful of the impact its actions are imposing on millions of households that are already struggling under the weight of meaty bills.
With that in mind, the remarks contained in the minutes of the Bank’s meeting and wider monetary policy report, all released at midday, will be crucial to understanding the likely way forward for borrowing costs.
The Bank is formally expected to raise its forecasts for economic growth as its staff no longer expect a recession this year.
But the outlook for Bank rate is a bit more clouded as inflation has proved more stubborn to bring down.
Bank governor Andrew Bailey’s comments to reporters will be especially closely watched for signs the rate-setting committee is edging towards a pause in its rate hikes.
The prospect of an end to the tightening will largely depend on the data ahead.
Andrew Hagger, personal finance expert at Moneycomms.co.uk, said: “Consumers and businesses will be praying that this is the last rate hike…. they will have their fingers crossed that inflation numbers will fall sharply before the next MPC (monetary policy committee) rate decision on 22 June.
“Savers may be enjoying the best returns on cash savings for more than a decade but those with borrowing have been pushed to the brink by the financial impact of a dozen consecutive rate hikes.”
MPs have voted to decriminalise abortion in England and Wales.
The amendment to the Crime and Policing Bill, abolishing the prosecution of women for terminating their pregnancy at any stage, passed by 379 votes to 137.
It represents the biggest shake-up in reproductive rights for almost 60 years.
Labour MP Tonia Antoniazzi, who tabled the so-called “New Clause One” (NC1), said it would ensure women do not face investigation, arrest, prosecution or imprisonment in relation to any pregnancies.
She said the current “Victorian” laws had been used against vulnerable women, citing cases such as Nicola Packer, who was prosecuted on suspicion of having an illegal abortion. She was found not guilty in May.
“Nicola’s story is deplorable, but there are many others,” Ms Antoniazzi said.
Abortion in England and Wales is currently a criminal offence but is legal with an authorised provider for up to 24 weeks after conception. The procedure is allowed after this time in very limited circumstances.
It is also legal to take prescribed related medication at home if a woman is less than 10 weeks pregnant.
Ms Antoniazzi said NC1 was “a narrow, targeted measure” that would not change how abortion services were provided or the rules under the 1967 Abortion Act.
Pro-choice campaigners demonstrating for decriminalising abortion in the UK
She said: “The 24 [week] limit remains. Abortions still require the approval of signatures of two doctors, and women would still have to meet the grounds laid out in the Act.”
The MP said that meant healthcare professionals “acting outside the law and abusive partners using violence or poisoning to end a pregnancy would still be criminalised, as they are now.”
She added: “This piece of legislation will only take women out of the criminal justice system because they are vulnerable and they need our help.
“As I have said before, and I will say it again, just what public interest is this serving? This is not justice, it is cruelty and it has got to end.”
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Should abortion be decriminalised?
The change will not come into effect immediately as the Crime and Policing Bill is still making its way through Parliament.
A separate amendment, put forward by Labour MP Stella Creasy, went further with a measure to “lock in” the right of a person to have an abortion while protecting those who help them.
However, her amendment was not voted on because Ms Antoniazzi’s passed, as expected.
Conservative MP Sir Edward Leigh, speaking against both amendments, described them as “not pro-woman” and argued they “would introduce sex-selective abortion”.
How did MPs vote?
MPs were given a free vote on the amendment, as is typically the case with so-called matters of conscience.
A breakdown of the vote showed it was passed overwhelmingly by Labour and Lib Dem MPs.
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Just eight Conservative MPs voted in favour, while all Reform UK MPs opposed the amendment, with the exception of the party’s leader Nigel Farage, who abstained.
Sir Keir Starmer was not present for the vote as he is currently in Canada for the G7 summit, but said earlier that his “longstanding in-principle position is that women have the right to a safe and legal abortion”.
The issue of women investigated by police over suspected illegal abortions has been in the spotlight due to several recent high-profile cases.
Ms Packer was cleared by a jury last month after taking prescribed abortion medicine at home when she was around 26 weeks pregnant, beyond the legal limit of 10 weeks.
In the Commons, Ms Antoniazzi cited another case of a young mother who was jailed for two years after she was forced to take illegal abortion medication by her abusive partner. He was never investigated.
The UK-US trade deal has been signed and is “done”, US President Donald Trump has said as he met Sir Keir Starmer at the G7 summit.
The US president told reporters in Canada: “We signed it, and it’s done. It’s a fair deal for both. It’ll produce a lot of jobs, a lot of income.”
Sir Keir said the document “implements” the deal to cut tariffs on cars and aerospace, describing it as a “really important agreement”.
“So this is a very good day for both of our countries – a real sign of strength,” the prime minister added.
Mr Trump added that the UK was “very well protected” against any future tariffs, saying: “You know why? Because I like them”.
However, he did not say whether levies on British steel exports to the US would be set to 0%, saying “we’re gonna let you have that information in a little while”.
Mr Trump also praised Sir Keir as a “great” prime minister, adding: “We’ve been talking about this deal for six years, and he’s done what they haven’t been able to do.”
He added: “We’re very longtime partners and allies and friends and we’ve become friends in a short period of time.
“He’s slightly more liberal than me to put it mildly… but we get along.”
Sir Keir added that “we make it work”.
As the pair exited a mountain lodge in the Canadian Rockies where the summit is being held, Mr Trump held up a physical copy of the trade agreement to show reporters.
Several leaves of paper fell from the binding, and Sir Keir quickly stooped to pick them up, saying: “A very important document.”
Sir Keir Starmer picks up paper from the UK-US trade deal after Donald Trump dropped it at the G7 summit. Pic: Reuters
The US president also appeared to mistakenly refer to a “trade agreement with the European Union” at one point as he stood alongside the British prime minister.
Mr Trump announced his “Liberation Day” tariffs on countries in April. At the time, he announced 10% “reciprocal” rates on all UK exports – as well as separately announced 25% levies on cars and steel.
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In a joint televised phone call in May, Sir Keir and Mr Trump announced the UK and US had agreed on a trade deal – but added the details were being finalised.
Ahead of the G7 summit, the prime minister said he would meet Mr Trump for “one-on-one” talks, and added the agreement “really matters for the vital sectors that are safeguarded under our deal, and we’ve got to implement that”.
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