Interest rates – live: Economic growth subdued as rate hold will bring ‘little relief’ to Britons

The BoE expects economic growth to be ‘broadly flat’ through 2024

Bank of England pauses interest hikes, as several European countries climb

The Bank of England‘s governor Andrew Bailey has described economic growth in the UK as “subdued”, as a major charity has warned that keeping interest rates unchanged at 5.25 per cent will bring ‘little relief’ to Britons.

At a press conference Mr Bailey said that economic growth will remain “broadly flat” through 2024 and then recover as we approach 2026.

He added: “Inflation is falling, and we expect it to keep falling this year and next. Our increases in interest rates are working to bring inflation back to the 2% target. So today we have voted to maintain Bank Rate at 5.25%.”

Amid calls in some quarters for the BoE to cut interest rates he said they will not be reduced for “quite some time yet” and that they need to “squeeze inflation out of the system.”

He added: “There’s been no discussion on the committee about cutting interest rates.”

The Joseph Rowntree Foundation (JDF) said the interest rate hold will bring “little relief to millions of families already struggling” with high prices, the rising costs of debt and a sharp increase in unemployment.

Key Points

• The Bank of England has left interest rates unchanged at 5.25 per cent
• BoE’s economic forecasts ‘damning indictment’ of Tory economic failure, says Labour’s Reeves
• Chancellor Jeremy Hunt upbeat over ‘resilient’ UK economy
• Interest rates staying at 5.25 per cent ‘extremely positive’ for housing industry, says estate agent boss
• Interest rates remaining at 5.25 per cent will bring ‘little relief’ to millions of families, say JRF

[2 November 2023 13:03 · Joe Middleton]

‘The pain is worse’ for the worst-off is we don’t reduce inflation, says Bailey

Andrew Bailey said that if inflation does not come down, people’s economic situations will become even worse.

“If we don’t get inflation down, then the pain is worse. As I’ve said a lot of times, and I will say it again: All inflation hurts the least well off the hardest.

“When it’s concentrated in energy and food, the essentials of life, it’s even harder.

“It’s critical that we bring inflation down. I think we’re seeing encouraging progress but we’ve got to see this through.”

[2 November 2023 13:12 · Joe Middleton]

Britain stuck in Tory ‘doom loop’, says TUC

TUC general secretary Paul Nowak said the UK is “stuck in a Conservative doom loop, and it is working people who are paying the price”.

“These [Bank of England] forecasts are a damning indictment of the Tories’ economic record, with growth set to slow further as unemployment rises. We can’t on like this.

He added: “We need a serious plan for jumpstarting our stagnant economy. That means a proper industrial strategy and investment in green infrastructure and public services. And after 13 years of failure we need a change of government.”

[2 November 2023 13:18 · Joe Middleton]

Reaction: Interest rates remaining at 5.25 per cent will bring ‘little relief’ to millions of families, say JRF

Responding to the Bank of England’s announcement that interest rates will remain at 5.25%, Joseph Rowntree Foundation chief economist Alfie Stirling said: “Even the continued pause on interest rates at 5.25% brings little relief to millions of families already struggling.

“People are in the grip of a suffocating squeeze from three sides - high and rising prices yet to stabilise, rising costs of debt that are still feeding through to mortgages and loans, and most recently a sharp increase in unemployment with more and more jobs at risk.

“More than 7 million families are already experiencing unacceptable hardship by going without basic essentials like food, a warm home and adequate clothing, and 2.3 million have gone into debt just to pay for these essentials.

But under today’s prevailing conditions, millions more are just one life event away from needing support to get back on their feet, whether that be losing a job, stopping work to care for a loved one, or being forced to move home.

“Further targeted support from government is now vital. For ministers to cast doubt on whether they will uprate benefits with inflation in full next year is deplorable. But this is just the start, and government must go further, and quickly, to repair a broken and threadbare safety net by ensuring that it always guarantees enough for people to afford the essentials.”

[2 November 2023 13:30 · Joe Middleton]

Reaction: British Chambers of Commerce welcomes rate hold but urges Chancellor to set ‘out a plan for growth’

The British Chambers of Commerce has welcomed the BoE’s decision to hold interest rates today but urged Chancellor Jeremy Hunt to set out a plan for growth in the Autumn Statement.

David Bharier, Head of Research at the British Chambers of Commerce, said: “Today’s decision to again hold the interest rate at 5.25% will allay some concerns of the businesses we speak to that are unable to stomach further rises.

“Our research has shown that interest rates have grown as a key issue among companies. This is especially true for smaller firms and those in the consumer-facing sectors, who have seen rising borrowing costs and decreased customer demand.

“The BCC’s Quarterly Economic Survey for Q3 found that 45% of all firms cited interest rates as a concern. With inflation set to ease further, and GDP and labour market data indicating the economy is cooling, the Chancellor’s Autumn Statement must set out a plan for growth.

“SMEs have been operating in an uncertain climate for too long, with policies constantly chopping and changing over the past few years. They need to see clear direction from decision makers, creating a roadmap for business that really boosts confidence and investment.”

[2 November 2023 13:41 · Joe Middleton]

BoE risks keeping interest rates ‘too high for too long’, says think-tank IPPR

The Bank of England risks keeping interest rates “too high for too long” as the economy and inflation slow over the coming months, say think-tank IPPR.

Carsten Jung, IPPR senior economist, said: “The Bank of England decided to hold rates steady, citing slowing but still persistently high services inflation and pay growth. But the Bank’s rate is still likely too high. The labour market is continuing to loosen, and company insolvencies are at their highest since 2009.

“High rates take more than a year to fully take effect and we will continue to see the economy and inflation slowing over the next months. There is a risk of the Bank keeping rates too high for too long.

“The Bank also is not transparent enough about how it models ‘passthrough’ inflation, nor how it expects corporate profits to evolve – both of which are key for understanding inflation at this point.”

[2 November 2023 14:00 · Joe Middleton]

Further industry reaction to BoE’s decision to keep interest rates unchanged at 5.25 per cent

Managing director of House Buyer Bureau, Chris Hodgkinson, commented: “We’re seeing clear signs that the property market is now starting to stabilise, although transaction levels and sold prices remain down on the historic highs seen in recent years, as the higher cost of borrowing and wider cost of living continue to restrict home buyers.

So today’s decision to hold interest rates should be viewed as a welcome positive for the property market and should allow buyers and sellers alike to act with a greater degree of confidence going into 2024.”

CEO of Octane Capital, Jonathan Samuels, said:“The Bank of England seems to have tamed inflation to a degree, albeit it’s taken considerably longer than it should and remains some way off the two percent target.

Given that there’s still a good bit of work to be done, today’s decision to hold interest rates won’t come as a surprise and we can expect the base rate to remain around five percent for some time yet.

Of course, this ‘new normal’ has historically been the norm anyway and, as home buyers and owners adjust to this latest benchmark of borrowing affordability, we should see the property market stabilise and return to business as usual come 2024.”

[2 November 2023 14:20 · Joe Middleton]

BoE’s decision to keep interest rates at 5.25 per cent a ‘safe bet in safeguarding against recession’, says economist

The Bank of England’s decision to keep interest rates at 5.25 per cent is a “safe bet in safeguarding against recession”, an economist has said.

Professor of Global Economy and Deputy Dean of Cranfield School of Management, Joe Nellis says: “With the UK’s interest rate at its highest level for 15 years and the tax burden at its uppermost limit for a staggering 70 years, it’s clear the economy struggling to gain any momentum.

“As the BoE teeters along the already very precarious economic tightrope, its decision to hold interest rates at 5.25% today (02 November) was a safe bet in safeguarding against recession.

“With companies going bankrupt and international tensions making for a very unstable environment, just a small gust of wind is enough for the BoE to lose its footing and send us into further economic decline. As we look ahead, we must watch and wait with bated breath as the UK’s economic outlook hangs in the balance.”