Bank of England set to announce interest rate decision – live

The UK’s cost of living crisis “is ending” and people have “cheered up”, a Tory MP has said.

Andrea Leadsom, Conservative MP for South Northamptonshire made her comments after inflation fell by 3.4 percent.

In an interview on the Sky Politics Hub on Wednesday (20 March), Ms Leadsom said: “What is really important is we have seen a fantastic drop in inflation today, that’s obviously cheered everyone up. It is what we have been working towards, is seeing the cost of living crisis end, and people take more home in their pay packets or in their salaries every day.”

Just half an hour to go before the BoE announces its interest rates decision…

James Burgess, Head of Commercial and insolvency expert at Atradius UK, said: “The tide has finally started to turn on the cost-of-living crisis, as inflation surpasses ONS forecasts to drop to its lowest level in two and a half years. This will be hugely promising news for homeowners and buyers reliant on fixed-rate mortgages, who have been the hardest hit by rising costs and will be hoping for interest rates to fall soon.

“We don’t expect the interest rate to fall until June, but we should start to see a positive impact on fixed mortgage rates, as these are set based on interest rate outlook rather than today’s rate. If the interest and inflation rates do decrease as expected, we should see average two-year fixed rate mortgages fall back below 5% by June.

“Construction businesses should feel the impact of this over the next few months, after a challenging 12 months where completion of new housing supply dropped due to supply chain challenges and reduced consumer demand. Firms are also navigating house price challenges, balancing profitability of building projects with unstable house prices and varying consumer demand. Consumer demand needs to stabilise if we are to overcome these challenges. A positive interest rates outlook today would be very welcome by businesses in the sector and bring a much-needed boost to the housing market.”

Switzerland has bucked the recent trend for Western governments and decided to cut interest rates on Thursday.

It has lowered its base rate from 1.75 per cent to 1.50 per cent in a move that surprised financial markets.

Analysts from BNP Paribas said on Wednesday it is unlikely rates will change today and they expect them to be kept at 5.25%.

“We do not think that this morning’s data [inflation] will move the needle for the BoE meeting tomorrow,” said Matthew Swannell, Dani Stoilova and Gerardo Martinez at BNP Paribas.

“One area of the focus will be the vote split, with the largest uncertainty around whether hawk Jonathan Haskel changes his vote from a 25bp (base point) vote hike to a hold.

“By his own admission, his February vote for a hike was ‘finely balanced’, so it is difficult to call how he will vote tomorrow.

“Our expectation is that despite the BoE’s core services inflation dropping in February – which it would seem Haskel attaches some weight to – he will need further evidence of its being on a downwards trajectory before adjusting his vote. We expect an unchanged vote split.”

Just an hour before the Bank of England reveals its decision on interest rates, Norway’s central bank has decided to keep its at 4.50 per cent.

“The current forecast indicates that the policy rate will continue to lie at 4.5% in the period to autumn before gradually moving down,” the central bank said in a statement.

Analysts in the Reuters poll on average have forecast that Norges Bank will cut the cost of borrowing twice in the second half of 2024, to 4.0 per cent by year-end.

“In its assessment of the interest rate outlook, the committee was concerned with the possibility that if the policy rate is lowered prematurely, inflation could remain high, among other things, because the crown might then weaken,” Norges Bank said.

Activity across the UK’s private sector has grown steadily this month, showing further signs that the economy has climbed out of last year’s “brief recession”, according to new estimates.

The S&P Global/CIPS flash UK purchasing managers’ index (PMI), closely watched by economists, reported a reading of 52.9 in March, down slightly from 53.0 in February.

The flash figures are based on preliminary data. Any score below 50 indicates that activity is contracting, and any score above means it is growing.

Economists had expected a slightly stronger PMI reading of 53.2 for the month, according to a consensus provided by Pantheon Macroeconomics UK.

The country’s services industry – which spans businesses from pubs, restaurants and hairdressers to transport, real estate and insurance – continued to drive an uplift across the broader private sector.

However, growth started to lose momentum in March, which the firms surveyed often said was due to pressure on households’ disposable incomes.

Nevertheless, manufacturing production increased for the first time in more than a year, the survey showed.

It hints that recovery could be on the horizon for factories which have grappled with a prolonged downturn amid tougher economic conditions, and disruption in the Red Sea hitting supply chains.

Chris Williamson, S&P Global Market Intelligence’s chief business economist, said: “Further signs of the UK economy having pulled out of last year’s brief recession are provided by the provisional PMI data for March.”

Women who lost out in the state pension age rise must be compensated now, a landmark report has said as it criticised the government for failing to inform them about changes.

The Parliamentary and Health Service Ombudsman has recommended that the government pay those affected compensation as it concludes that the department for work and pensions (DWP) has “not acknowledged its failings nor put things right for those women affected.”

It comes after long-awaited report into how women lost out on money due to increases in their pension age was published.

Ahead of today’s Bank of England interest rates decision, Henk Potts, Market Strategist at Barclays Private Bank said:

“The Bank of England is expected to keep rates at 5.25% for a fifth consecutive meeting on Thursday and maintain the current cautious guidance. However, recent data and economic projections have supported the case for interest rate cuts. Inflation has moderated and labour markets are finally starting to ease. Headline CPI is expected to fall below the central bank’s 2% target level later in the year, with unemployment climbing to 4.5% in the final quarter.

“The Monetary Policy Committee (MPC) is likely to be laser-focused on the incoming inflation prints, labour market reports and growth figures for the first quarter. These could pave the way for a pivot to an easing stance by the May meeting, with the first 25bp rate cut pencilled in for June. With more to follow, we anticipate that the Bank Rate will finish the year at 4%.”

Inflation is dropping towards the official 2 per cent annual target; the economy may well be out of its shallow recession by now; more tax cuts are on the way. But the voters are no longer listening. They made their minds up long ago.

The reasons for the Tory defeat will mostly not be found in what happens over the next few months, but what has happened in the last few years – and, indeed, since the first Conservative-dominated administration was formed in 2010. Change feels inevitable.

An interest rate is a measure that tells you how high the cost of borrowing money is, or how high the rewards of saving are.

If you are borrowing money, typically from a bank, the interest rate on that money is the amount you will be charged for borrowing it.

It is a charge on top of the total amount of the loan and will be shown as a percentage of the overall.

Higher percentages mean paying more money to the lender for borrowing the money.

If you are saving money in a bank account, the interest rate on that money is the amount you will accrue on top of your savings. Banks will pay you a percentage of your total savings, typically at the end of the year.