The Bank of England have decided today that interest rates will remain at 0.5 percent in the UK, with a decreased majority in the vote of six to three, when previously it was seven to two.
Alex Brandreth, deputy chief investment officer at Brown Shipley, commented on the decision: “Andrew Haldane, the chief economist, has changed his vote from interest rates remaining as they are to an increase. This is important because it’s the first time the chief economist has dissented in seven years, which wasn’t anticipated by markets.
“This has increased the probability of an interest rate rise later in the year, with August and November the more likely times to see a move. We believe waiting to November would make more sense, when we have a clearer picture on what Brexit actually means.”
Michael Saunders and Ian McCafferty were the other two who voted against the decision and in favour of increasing interest rates.
A senior economist at Hargreaves Lansdown, Ben Brettell, also commented: “As recently as April it looked a racing certainty that rates would have risen by now. But a slew of disappointing economic data in the subsequent weeks has firmly put paid to that.
“Sterling jumped on the news, gaining almost a cent against the dollar as traders factored in a bigger chance of a move in August. But on balance I still think we might not see a rate rise for the rest of the year - policymakers will at the very least want confirmation that the weak first-quarter growth figure was just a blip before raising borrowing costs.”
Richard Stone, Chief Executive at The Share Centre, speculated on what the decision means for personal investors:“Importantly there are continued high rates of employment and there has now been a return to real wage growth.This should result in a continued pick-up in consumer demand within the economy. Combined with improvements in the public finances, giving the Government more scope to increase spending and higher oil prices driving increased costs, inflation may be expected to moderate its recent falls.
“We continue to expect a rate rise in August. For investors, this should be seen as a further positive sign of the progressive return of the economy to ‘normal’ following the financial crisis. It may though mean a stronger exchange rate and therefore weaker overseas earnings in Sterling terms for the large multi-national companies that dominate the FTSE100. It may also mean companies with large amounts of debt struggle under an increased interest burden while those companies with strong cash positions will receive a boost, along with personal savers, from higher interest rates."
Brown Shipley provides wealth management services for high net worth clients, comprising investment and fund management, self-administered pension schemes, estate planning and lending services. It has offices in London, Manchester, Birmingham, Leeds, Edinburgh and Nottingham.
Bristol-based Hargreaves Lansdown is a FTSE 100 constituent and the UK’s biggest execution (XO) broker. They are used by over one million investors and manage £88.8 billion, as at 30 April 2018.
The Share Centre is an investment broker, providing stockbroking services for private investors and corporate services, including fund administration and white label share dealing services.