Bank of England set to cut rate as UK economy weakens
"There are clear signs of (UK) economic deterioration, particularly stemming from the labour market," Victoria Scholar, head of investment at Interactive Investor, noted ahead of the latest rate call.
"Yet policymakers must weigh this up against the risk of inflationary pressures particularly with rising food prices and international uncertainty around (US President Donald) Trump's tariffs and volatility in energy markets."
Against this backdrop, analysts expect splits within the Bank's Monetary Policy Committee.
Some argue that while the majority of the nine policymakers, including governor Andrew Bailey, will vote for a quarter-point cut, some are likely to demand an even larger reduction and others no change.
A quarter-point cut Thursday would be the BoE's fifth such reduction since starting a trimming cycle in August 2024, emphasising its "gradual" approach to reducing rates.
The BoE's main task is to keep Britain's annual inflation rate at 2.0 percent but the latest official data showed it had jumped unexpectedly to an 18-month high in June.
The Consumer Prices Index increased to 3.6 percent as motor fuel and food prices stayed high.
Weak economy
Latest official figures also show that Britain's economy unexpectedly contracted for a second month running in May and UK unemployment is at a near four-year high of 4.7 percent.
This is largely down to Prime Minister Keir Starmer's Labour government increasing a UK business tax from April, the same month that the country became subject to Trump's 10-percent baseline tariff on most goods.
London and Washington reached an agreement in May to cut levies of more than 10 percent imposed by Trump on certain UK-made items imported by the United States, notably vehicles.
Last month, the BoE warned in a report that tariff unpredictability and Middle East conflicts pose risks to UK financial stability.
The US Federal Reserve last week kept interest rates unchanged, defying strong political pressure from Trump to slash borrowing costs in a bid to boost the world's biggest economy.
Asked about US tariffs following the decision, Fed Chair Jerome Powell told a press conference: "We're still a ways away from seeing where things settle down."
The European Central Bank is meanwhile widely expected to keep rates unchanged at its next meeting, with eurozone inflation around the ECB's two-percent target.
But that could change, according to some economists, based on how Trump's tariffs affect the single-currency bloc.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Fashion Network
36 minutes ago
- Fashion Network
Revolution Beauty rejects bid from private equity firm True, sources say
By Reuters Revolution Beauty has rejected a takeover offer from specialist private equity firm True, leaving the cosmetics group likely to revive a capital raising from existing shareholders, two people familiar with the matter said. The London-listed makeup and haircare company, whose products retail online and via high street stores including Boots and Superdrug, kicked off a sale process in May, and in June said it had received proposals from a number of parties. True was the only company to submit a bid for the firm, which counts British online fashion retailer Debenhams as its largest shareholder, the people said, asking not to be identified because the talks were private. However, the offer was seen as undervaluing the company, according to one source. Revolution Beauty declined to comment. Debenhams and True did not respond to requests for comment. Mike Ashley's Frasers Group had also explored buying the firm but said last month it had pulled out of the process. Revolution Beauty, founded in Kent in 2014, floated in a post-pandemic listing boom at a valuation of nearly 500 million pounds, but its value subsequently cratered to around 12 million pounds, according to LSEG data. The company is likely instead to revive plans to raise funds from key shareholders if no other bidders materialise, the people said. It told shareholders earlier this year that it was reviewing its funding structure and mulling a fundraise from key shareholders after its annual sales slumped by more than a quarter. Debenhams' participation in any equity raise may hinge on the completion of its own debt refinancing plans, the second person said. In May, Revolution Beauty also said it had begun talks with lenders over amending and extending the terms of its revolving credit facilities. © Thomson Reuters 2025 All rights reserved.
Fashion Network
38 minutes ago
- Fashion Network
Revolution Beauty rejects bid from private equity firm True, sources say
Revolution Beauty has rejected a takeover offer from specialist private equity firm True, leaving the cosmetics group likely to revive a capital raising from existing shareholders, two people familiar with the matter said. The London-listed makeup and haircare company, whose products retail online and via high street stores including Boots and Superdrug, kicked off a sale process in May, and in June said it had received proposals from a number of parties. True was the only company to submit a bid for the firm, which counts British online fashion retailer Debenhams as its largest shareholder, the people said, asking not to be identified because the talks were private. However, the offer was seen as undervaluing the company, according to one source. Revolution Beauty declined to comment. Debenhams and True did not respond to requests for comment. Mike Ashley 's Frasers Group had also explored buying the firm but said last month it had pulled out of the process. Revolution Beauty, founded in Kent in 2014, floated in a post-pandemic listing boom at a valuation of nearly 500 million pounds, but its value subsequently cratered to around 12 million pounds, according to LSEG data. The company is likely instead to revive plans to raise funds from key shareholders if no other bidders materialise, the people said. It told shareholders earlier this year that it was reviewing its funding structure and mulling a fundraise from key shareholders after its annual sales slumped by more than a quarter. Debenhams' participation in any equity raise may hinge on the completion of its own debt refinancing plans, the second person said. In May, Revolution Beauty also said it had begun talks with lenders over amending and extending the terms of its revolving credit facilities.
Fashion Network
38 minutes ago
- Fashion Network
Revolution Beauty rejects bid from private equity firm True, sources say
Revolution Beauty has rejected a takeover offer from specialist private equity firm True, leaving the cosmetics group likely to revive a capital raising from existing shareholders, two people familiar with the matter said. The London-listed makeup and haircare company, whose products retail online and via high street stores including Boots and Superdrug, kicked off a sale process in May, and in June said it had received proposals from a number of parties. True was the only company to submit a bid for the firm, which counts British online fashion retailer Debenhams as its largest shareholder, the people said, asking not to be identified because the talks were private. However, the offer was seen as undervaluing the company, according to one source. Revolution Beauty declined to comment. Debenhams and True did not respond to requests for comment. Mike Ashley's Frasers Group had also explored buying the firm but said last month it had pulled out of the process. Revolution Beauty, founded in Kent in 2014, floated in a post-pandemic listing boom at a valuation of nearly 500 million pounds, but its value subsequently cratered to around 12 million pounds, according to LSEG data. The company is likely instead to revive plans to raise funds from key shareholders if no other bidders materialise, the people said. It told shareholders earlier this year that it was reviewing its funding structure and mulling a fundraise from key shareholders after its annual sales slumped by more than a quarter. Debenhams' participation in any equity raise may hinge on the completion of its own debt refinancing plans, the second person said. In May, Revolution Beauty also said it had begun talks with lenders over amending and extending the terms of its revolving credit facilities.
