By George Prior
The Bank of England will raise interest rates again next month despite UK inflation cooling, predicts the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations.
The warning from deVere Group’s Nigel Green comes as fresh figures reveal that UK inflation fell to 7.9% in June, from 8.7% the month before.
He says: “Despite the data showing that the battle against inflation in the UK is being won, we expect the Bank of England will confirm it’ll continue with its aggressive interest rate hiking agenda at the monetary policy meeting on August 1.
“Although the consumer price index fell to 7.9% last month, amid lower petrol prices and a slowdown in the pace of growth for food, beverages and other basics, the central bank officials will likely argue that there is still work to be done.
“We believe the Bank will insist that although inflation is certainly coming down, it is doing so very, very gradually. It remains sticky – still the highest in the G7 – and a long way from the 2% target.
Free Reports:
Get our Weekly Commitment of Traders Reports - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.
Download Our Metatrader 4 Indicators – Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter
“They will say prices are still far too high and rising at a quicker pace than they have done in the past. In addition, they are likely to cite strong wage growth in the three months to May.”
He continues: “Against this backdrop, we expect the Bank of England to increase interest rates for a 14th consecutive time at its next policy meeting – and we wouldn’t be surprised if there were a second consecutive 50 basis point hike.”
Another interest rate hike could “pile on more misery” for households, homeowners, and businesses.
Higher interest rates lead to increased borrowing costs, making mortgages more expensive. Homeowners with variable-rate mortgages are likely to face higher monthly payments. Rising interest rates will also reduce disposable income as loan repayments increase, affecting household spending and overall economic activity.
Businesses reliant on borrowing may face higher interest expenses, which can affect their profitability and ability to expand or invest. In addition, higher interest rates can reduce consumer spending, affecting businesses dependent on consumer demand.
Hiked interest rates typically negatively impact the value of existing fixed-income investments, such as bonds, as newer issuances offer higher yields.
The higher rates also historically lead to stock market uncertainty and increase volatility, as investors reassess the attractiveness of different investments. Sectors sensitive to interest rates, such as housing, cars, and financial sectors, could experience greater impacts than others.
Nigel Green concludes: “We believe that although the battle to tame inflation seems to be being won, with the lowest reading in 16 months, the Bank of England is highly unlikely to be dissuaded from its course of rate hiking action for the time being.”
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
- Gold Falls for the Fifth Consecutive Trading Session Nov 14, 2024
- Profit-taking is observed on stock indices. The data on wages in Australia haven’t met expectations Nov 13, 2024
- USD/JPY at a Three-Month Peak: No One Opposes the US Dollar Nov 13, 2024
- Can Chinese Tech earnings offer relief for Chinese stock indexes? Nov 13, 2024
- Bitcoin hits an all-time high above $88,000. Oil remains under pressure Nov 12, 2024
- Brent Crude Stumbles as Market Sentiments Turn Cautious Nov 12, 2024
- Bitcoin hits new record high just shy of $82,000! Nov 11, 2024
- The Dow Jones broke the 44 000 mark, and the S&P 500 topped 6 000 for the first time. The deflationary scenario continues in China Nov 11, 2024
- AUD/USD Stabilises as Traders Await Economic Signals Nov 11, 2024
- COT Metals Charts: Speculator Bets led lower by Gold, Silver & Platinum Nov 10, 2024