Bank of England rate-setters are almost certain to cut Interest rates today, despite inflation rising, as they focus on dragging the UK economy out of a period of stagnation.
Prices are rising at 3.6%, well above the Bank’s 2% target, but the economy shrank for the second consecutive month in May, while unemployment climbed to a four-year high.
Warnings of a £50 billion black hole follow a failure to stimulate growth and could mean either cuts in spending or more tax rises – as much as 5p on income tax.
Today’s meeting of the Bank’s monetary policy committee is expected to see borrowing costs cut from 4.25% to 4%, its fifth cut since last August, taking it to the lowest since March 2023.
However, economists believe the decision will not be unanimous.
James Smith, developed markets economist UK at ING, thinks a three-way split is likely, with Catherine likely to vote for no change, along with Huw Pill and Megan Greene.
“At the opposite end of the spectrum, arch-dove Swati Dhingra is likely to vote for a larger 50 basis point cut,” says Smith. “Fellow dove Alan Taylor might be tempted to join her, though he recently said he’d like to see three more cuts this year, which tends to suggest he’ll vote for 25bp moves at each meeting.”
Smith reckons seven members will vote for a 25 basis point cut.
Most observers believe the Bank will sit on its hands for foreseeable future, though Michael Saunders, former MPC member and senior economic adviser at Oxford Economics, expects a further cut this year and another early next year. He anticipates that rates could even fall as low as 3.25% by mid-2026.
Company updates
InterContinental Hotels, owner of the George Hotel in Edinburgh, posted a solid set of H1 results, underscored by strong trading momentum, record hotel openings, and continued investment in its global estate.
Operating profits from reportable segments rose 13% to $604m, while total revenue climbed 8% to $2.52bn. However, net debt ballooned 21% to $3.36bn.
Harbour Energy unveiled a $100m share buyback as it reported a jump in interim adjusted earnings. Guidance was lifted to 460,000-475,000 barrels of oil equivalent a day from 455-475 kboepd, with the divestment of Harbour’s Vietnam business more than offset by a strong production performance to date. Adjusted EBITDAX rose to $3.88bn from $1.25bn.
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