UK rate decision

Despite all the economic despondency the Bank has once again decided to hold out for evidence that inflationary pressures are easing.

The decision for the Bank to sit on its hands once more was no surprise, however evidence is rapidly mounting that the UK is edging ever closer to recession. Everywhere you look the economic reality is becoming more and more grim: the falling housing market, the weakening pound, climbing unemployment and a struggling service sector.

Oil prices may have dropped 25 per cent from their highs in July so any worries that the Bank might actually need to raise rates have all but disappeared, but it would have been premature to cut today.  

The next move from the Bank is almost certain to be a cut but we may well have to wait until November or December.

GFT’s CPI futures contracts show inflation is expected to peak at around 5 per cent September’s year-on-year data, which will be released in October.