Bank of England expected to leave interest rates on hold;...
https://www.theguardian.com/profile/graemewearden·2026-06-18·via The Guardian
Introduction: Bank of England interest rate decision today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK households and businesses could be spared a rise in borrowing costs today, as the British economy creaks under the strain from the Iran war.
The Bank of England is widely expected to leave interest rates unchanged at 3.75% at noon today, after its latest monetary policy committee meeting.
Policymakers at the BoE will try to balance the challenge of containing imported inflation from the Middle East conflict, while avoiding intensifying the squeeze on firms and consumers who have been hit by the rise in energy costs.
With the economy shrinking slightly in April, and inflation lower than forecast in May (we learned yesterday), a hike in borrowing costs appears unnecessary. The City of London money markets indicate there’s a 98% chance that interest rates are left on hold, and just a 2% chance of a rise.
Tomasz Wieladek, chief European macro economist at investment management firm T. Rowe Price, argues that the Bank may not need to tighten monetary policy at all in the coming months.
Monetary policy in the UK appears to be finally working. A prolonged period of restrictive monetary policy has, to a degree, weakened inflation dynamics.
Given the good news on inflation and the recent decline in oil prices, the MPC will likely conclude that no more hikes are necessary to stabilise inflation in the UK.
UK wage growth was stronger than expected in the three months to April, this morning’s labour market data shows.
Basic pay (which excludes bonuses) rose by 3.4% year-on-year in the quarter, while total pay (including bonuses) rose by 4.4%; both measures were unchanged compared with a month earlier.
Average pay rose by 5.1% for the public sector and 2.9% for the private sector. “Public sector pay growth is once again affected by the timing of pay awards varying this year,” the ONS explains.
Unemployment rate falls to 4.9%
Unemployment across Britain has fallen back, as more people either found work or dropped out of the labour market.
The UK unemployment rate dipped to 4.9% in the three three months from February to April, down from 5% a month ago, easing fears that the energy crunch could drive up job losses.
A chart showing the UK unemployment rate Photograph: ONS
The Office for National Statistics reports that the number of people unemployed dropped by 105,00 in the quarter to 1.764m.
The number of people employed rose by around 100,000 to 34.410m, while the number economically inactive (neither in work nor looking for a job) rose by 137,000 to 9.136m.
ONS director of economic statistics Liz McKeown says:
“The labour market remained broadly stable in the latest quarter, with further softening evident in some measures. Payroll numbers continued to fall over this period, with new recruits at their lowest level in five years. However, overall employment was little changed, with some signs of workers moving into self‑employment.
“Vacancies also continued to fall, further suggesting that firms are becoming more cautious about taking on new staff. The decline has been most persistent among lower‑paying sectors and smaller employers, although the largest fall this quarter was in professional services.
Introduction: Bank of England interest rate decision today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK households and businesses could be spared a rise in borrowing costs today, as the British economy creaks under the strain from the Iran war.
The Bank of England is widely expected to leave interest rates unchanged at 3.75% at noon today, after its latest monetary policy committee meeting.
Policymakers at the BoE will try to balance the challenge of containing imported inflation from the Middle East conflict, while avoiding intensifying the squeeze on firms and consumers who have been hit by the rise in energy costs.
With the economy shrinking slightly in April, and inflation lower than forecast in May (we learned yesterday), a hike in borrowing costs appears unnecessary. The City of London money markets indicate there’s a 98% chance that interest rates are left on hold, and just a 2% chance of a rise.
Tomasz Wieladek, chief European macro economist at investment management firm T. Rowe Price, argues that the Bank may not need to tighten monetary policy at all in the coming months.
Monetary policy in the UK appears to be finally working. A prolonged period of restrictive monetary policy has, to a degree, weakened inflation dynamics.
Given the good news on inflation and the recent decline in oil prices, the MPC will likely conclude that no more hikes are necessary to stabilise inflation in the UK.
