Interest rates – live: Economic growth subdued as rate hold will bring ‘little relief’ to Britons

The Bank of England‘s governor Andrew Bailey has described economic growth in the UK as “subdued”, as a major charity has warned that keeping interest rates unchanged at 5.25 per cent will bring ‘little relief’ to Britons.

At a press conference Mr Bailey said that economic growth will remain “broadly flat” through 2024 and then recover as we approach 2026.

He added: “Inflation is falling, and we expect it to keep falling this year and next. Our increases in interest rates are working to bring inflation back to the 2% target. So today we have voted to maintain Bank Rate at 5.25%.”

Amid calls in some quarters for the BoE to cut interest rates he said they will not be reduced for “quite some time yet” and that they need to “squeeze inflation out of the system.”

He added: “There’s been no discussion on the committee about cutting interest rates.”

The Joseph Rowntree Foundation (JDF) said the interest rate hold will bring “little relief to millions of families already struggling” with high prices, the rising costs of debt and a sharp increase in unemployment.

Key Points

• The Bank of England has left interest rates unchanged at 5.25 per cent

• BoE’s economic forecasts ‘damning indictment’ of Tory economic failure, says Labour’s Reeves

• Chancellor Jeremy Hunt upbeat over ‘resilient’ UK economy

• Interest rates staying at 5.25 per cent ‘extremely positive’ for housing industry, says estate agent boss

• Interest rates remaining at 5.25 per cent will bring ‘little relief’ to millions of families, say JRF

Bank of England announcement expected at midday

10:03 , Joe Middleton

Good morning and welcome to our Bank of England (BoE) live blog where we will be bringing you the latest updates and analysis on the interest rates announcement at 12pm.

Economists expect the BoE to keep rates at 5.25% due to concerns that the UK economy is heading towards a recession.

In September, the BoE kept rates unchanged at 5.25% - the first hold decision for nearly two years after 14 hikes in a row.

What are interest rates?

10:07 , Joe Middleton

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.

How do interest rates impact mortgages?

10:09 , Joe Middleton

Changes in the Bank of England’s base rate, which is the interest rate at which high street banks borrow from Threadneedle Street, has a knock-on effect on the interest rates that the former then set their mortgage borrowers.

The changes will also affect anyone with savings and anyone who is borrowing money from banks.

‘Bank of England is between a rock and a hard place'

10:15 , Joe Middleton

Nick Brooks, Head of Economic and Investment Research at ICG, thinks the BoE is between a rock and a hard place as economic growth is slowing down, but inflation is still running high.

He said:

• The BoE is likely to keep its benchmark rate steady at 5.25% and emphasise that future policy remains data dependent.

• The dilemma the BoE faces is that although economic growth is slowing, the UK’s inflation rate is running at the highest among major developed economies and is proving very hard to bring down.

• Until there is a significant loosening of labour markets, the BoE will likely need to keep rates at current levels, with the risk that it is forced to tighten further in the coming months.

Unite calls on Bank of England to cut interest rates to help hard-up workers

10:25 , Joe Middleton

Unite has accused the Bank of England of squeezing workers living standards and have urged them to cut interest rates.

The Monetary Policy Committee (MPC), responsible for setting interest rates makes its decision today at midday.

Unite general secretary, Sharon Graham said: “The Bank of England has been squeezing the living standards of workers while the banks make billions from two years of rising interest rates - this has to stop. High inflation has not been driven by workers it’s been driven by the greed of the profiteers.

“The big four are just picking the pockets of workers to give handouts to shareholders. It’s high time the Bank of England took action against the real culprits of this cost of living crisis.”

Sunak unpopularity could influence Bank decision, suggests economist

10:30 , Joe Middleton

Althea Spinozzi, senior fixed income strategist at investment platform Saxo, has suggested Rishi Sunak’s unpopularity could influence today’s decision.

She said the government’s fiscal policies “remain uncertain as Rishi Sunak is losing popularity, adding to inflation upside risk” – suggesting that a desperate PM may be tempted to cut taxes win votes.

“Within this environment, the BoE is on the verge of losing its credibility. It tightened the economy too little, too slowly. There is no option for governor Andrew Bailey other than sticking to the higher-for-longer rhetoric, hoping to maintain a hawkish bias while it’s becoming more apparent that policymakers are afraid of breaking something.”

What is happening with house prices?

10:39 , Joe Middleton

House prices rose by 0.9 per cent on average month-on-month in October - likely reflecting a constrained supply of properties for buyers to choose from - according to an index released on Wednesday.

Across the UK, property values fell by 3.3 per cent compared with October last year, Nationwide said. The average UK house price in October was £259,423.

Robert Gardner, Nationwide‘s chief economist, said that despite the month-on-month rise in house prices: “Housing market activity has remained extremely weak, with just 43,300 mortgages approved for house purchase in September, around 30% below the monthly average prevailing in 2019.”

He continued: “The uptick in house prices in October most likely reflects the fact that the supply of properties on the market is constrained.

“There is little sign of forced selling, which would exert downward pressure on prices, as labour market conditions are solid and mortgage arrears are at historically low levels.

“Activity and house prices are likely to remain subdued in the coming quarters.”

He said that with the Bank of England base rate not expected to decline significantly in the years ahead, “borrowing costs are unlikely to return to the historic lows seen in the aftermath of the pandemic.”

Interest rates are already ‘much too high’ and should be cut, says top accountant

10:52 , Joe Middleton

Richard Murphy, an economist and Professor of Chartered Accounting Practice at the Sheffield University, said that

“Discussion about the Bank of England’s interest rate decision has focused on whether it will hold rates rather than increase them, but this entirely misses the point about what is needed now.

“Almost certainly, the Bank of England has already wildly overreacted to the inflation that we have, meaning that interest rates are already much too high.

“That fact, coupled with its current policy of quantitative tightening, which is deliberately inflating current financial market interest rates, means that the impact of high interest rates is now almost wholly destructive on the economy, businesses, households and individuals.

“What we need now are urgent and significant interest rate cuts to reduce the harm already caused and to keep businesses, mortgaged households, renters, local authorities and others going when their financial viability is now under threat, but will the Bank of England do that? I very much doubt it. It’s as if they don’t care.”

Unlikely policymakers will vote for interest rates rise, says economist

11:23 , Joe Middleton

James Smith, a developed markets economist at ING, said it was unlikely that a majority of policymakers will vote for a rise this month.

“It would only take one committee member to change their mind to tip the balance in favour of more tightening - but we’re doubtful,” Mr Smith said.

He said that there had been little new data since the last vote, so those who voted against hiking rates are unlikely to change their minds. He added that one of those who voted to hike last time - Jon Cunliffe - has since left the MPC.

Business confidence plummets as BoE interest rate decision approaches....

11:39 , Joe Middleton

The latest research from Grant Thornton Business Outlook Tracker indicates that businesses are feeling gloomy as we head towards winter and another interest rate decision by the Bank of England.

The latest survey of 600 UK mid-sized businesses finds that, despite a slowing down of inflation, businesses’ confidence in their revenue growth over the next six months has fallen to its lowest level since October last year.

The number of businesses pessimistic about their growth has also more than doubled, from 5% (August) to 11% of respondents.

With interest rates high and likely to remain so for the near future, businesses’ confidence in their funding position has decreased -24pp since August, reaching the second lowest level recorded by the Tracker. The number of those pessimistic in their position more than doubled, from 5 per cent to 12 per cent.

Schellion Horn, Head of Economic Consulting, Grant Thornton UK LLP, said: “While optimism has remained relatively high in our Tracker for the past 18 months, despite the economic challenges faced, this was likely due to many businesses having their funding locked in but it’s likely that high interest rates are now really biting.

“Funding costs are rising and covenants are tightening and so businesses are finally feeling the squeeze. And while another interest rate decision is due today, with inflation stalling unexpectedly in September, it’s unlikely that they will reduce anytime soon.”

Bank of England is likely to ‘sit tight’ on interest rates, says investment firm boss

11:51 , Joe Middleton

Alex Brazier, who works for asset management firm Blackrock, has told Bloomberg that the Bank of England is likely to “sit tight” on interest rates.

He added that cuts in late 2024 could be “plausible” as the BoE does need to bring down inflation.

The Bank of England has left interest rates unchanged at 5.25 per cent

12:03 , Joe Middleton

The Bank of England has left interest rates unchanged at 5.25 per cent, a 15-year high.

It is the second consective meeting the BoE has done this after 14 increases from December 2021 to August this year.

Interest rate hold is ‘brief respite for borrowers’, says personal finance expert

12:11 , Joe Middleton

Lily Megson, policy director at My Pension Expert, said: “Today’s decision is but a brief respite for borrowers; the status quo falls far short of meeting consumer expectations for a stable financial landscape.

“Inflation continues to bulldoze consumer’s purchasing power and savings. Meanwhile, ongoing discussions about the triple lock and broader economic uncertainties have left many in retirement planning feeling apprehensive.

“And as we approach the holiday season, the pressure to manage finances intensifies. High interest and inflation may prompt some to rethink their holiday spending plans, while others might feel they have no choice but to take on debt.”

Reaction: Interest rates staying at 5.25 per cent ‘extremely positive’ for housing industry

12:15 , Joe Middleton

Sam Mitchell, CEO of Purplebricks, an online estate agent, said the decision to hold rates was good news for the sector following a housing price rise in October.

They said: “The Bank of England’s decision to keep interest rates at the same level is extremely positive for the housing industry, meaning that estate agents and customers alike can be optimistic about the state of the sector after a difficult year.

The decision to hold interest rates is more good news for the sector following a rise in prices during October, which is reflected in the increasingly competitive rates banks are offering to consumers. This has meant an increase in activity which, while perhaps too late to affect this year’s data dramatically, bodes well for a good start to 2024.

However, as we gear up to the General Election, any political noise about potential stamp duty cuts has the potential to destabilise the market. If people think there is a chance that rates might be cut then this could wrongly and unnecessarily delay their purchasing decisions.”

BoE’s economic forecasts ‘damning indictment’ of Tory economic failure, says Reeves

12:21 , Joe Middleton

Labour’s shadow chancellor Rachel Reeves has said the Bank of England’s downgraded economic forecasts are a “damning indictment” of Tory economic failure.

The BoE expects GDP to grow by 0.5% this year, unchanged from its last forecast, but downgraded its outlook for 2024 from 0.5% to 0%.

Responding to today’s announcement, she said: “These forecasts are damning indictment of 13 years of economic failure that has left working people worse off. At the start of the year, Rishi Sunak and Jeremy Hunt promised to get the economy growing.

“These figures show we are going in the wrong direction. We are forecast to have gone from low growth to no growth, with working people paying the price.

“Labour’s plans for growth will make working people better off by getting Britain building again, cutting energy bills, and creating good jobs across the country.”

Chancellor Jeremy Hunt upbeat over ‘resilient’ UK economy

12:25 , Joe Middleton

Chancellor Jeremy Hunt has struck a more positive tone than his opposition counterpart and despite the negative Bank of England forecasts thinks the UK economy has been more resilient than many expected.

He said: “Inflation is falling, wages are rising and the economy is growing. The UK has been far more resilient than many expected, but the best way to deliver prosperity is through sustainable growth.

“The Autumn Statement will set out how we will boost economic growth by unlocking private investment, getting more Brits back to work, and delivering a more productive British state.”

Andrew Bailey has started his press conference...

12:40 , Joe Middleton

The governor of the Bank of England Andrew Bailey has said that inflation is falling and policymakers are still trying to bring it down to the 2 per cent target.

In reference to the 5.25 per cent rate staying the same he said that it is “too early” to think about rate cuts.

He said: “Let me be clear, there is absolutely no room for complacency. Inflation is still too high.

“We will keep interest rates high enough for long enough to make sure we get inflation all the way back to the 2% target.

“We will be watching closely to see if further increases in interest rates are needed. But even if they are not, it is much too early to be thinking about rate cuts.”

GDP to remain ‘broadly flat’ through 2024

12:45 , Joe Middleton

Andrew Bailey said that gross domestic product (GDP) would remain “broadly flat” throughout 2024 before recovering as we approach 2026.

He said: “It remains below historical averages, however, reflecting both restrictive monetary policy and subdued potential supply growth.”

Interest rates will remain restrictive for ‘quite some time yet’, says Bailey

12:49 , Joe Middleton

Bank of England governor Andrew Bailey said interest rates will remain restrictive for “quite some time yet” but that the BoE has to be “mindful of the balance of risks” of doing too little or too much.

“Monetary policy is currently restrictive in the sense that, if we maintain this stance for long enough, we will squeeze inflation out of the system,” he said.

“That is what we will do. This also means being on watch for further signs of inflation persistence that may require interest rates to rise again.

“But we should not keep monetary policy restrictive for excessively long. We have to be mindful of the balance of risks between doing too little and doing too much.

“How long a restrictive stance will be needed will ultimately depend on what the incoming data tell us about the outlook for inflation over the medium term.

“The MPC’s latest projections indicate that monetary policy is likely to need to be restrictive for quite some time yet.”

Israel-Palestine conflict creates risk of higher energy prices, says Bailey

12:57 , Joe Middleton

Bank of England Governor Andrew Bailey said the war between Israel and Hamas is creating economic uncertainty.

He said: “The events in the Middle East are tragic in terms of the human cost. We have to view it through the economic lens.

“It does create uncertainty, it does I think create a risk of higher energy prices.

“So far, I would say, that hasn’t happened and that’s obviously encouraging, but the risk remains.”

‘The pain is worse’ for the worst-off is we don’t reduce inflation, says Bailey

13:03 , Joe Middleton

Andrew Bailey said that if inflation does not come down, people’s economic situations will become even worse.

“If we don’t get inflation down, then the pain is worse. As I’ve said a lot of times, and I will say it again: All inflation hurts the least well off the hardest.

“When it’s concentrated in energy and food, the essentials of life, it’s even harder.

“It’s critical that we bring inflation down. I think we’re seeing encouraging progress but we’ve got to see this through.”

Britain stuck in Tory ‘doom loop’, says TUC

13:12 , Joe Middleton

TUC general secretary Paul Nowak said the UK is “stuck in a Conservative doom loop, and it is working people who are paying the price”.

“These [Bank of England] forecasts are a damning indictment of the Tories’ economic record, with growth set to slow further as unemployment rises. We can’t on like this.

He added: “We need a serious plan for jumpstarting our stagnant economy. That means a proper industrial strategy and investment in green infrastructure and public services. And after 13 years of failure we need a change of government.”

Reaction: Interest rates remaining at 5.25 per cent will bring ‘little relief’ to millions of families, say JRF

13:18 , Joe Middleton

Responding to the Bank of England’s announcement that interest rates will remain at 5.25%, Joseph Rowntree Foundation chief economist Alfie Stirling said: “Even the continued pause on interest rates at 5.25% brings little relief to millions of families already struggling.

“People are in the grip of a suffocating squeeze from three sides - high and rising prices yet to stabilise, rising costs of debt that are still feeding through to mortgages and loans, and most recently a sharp increase in unemployment with more and more jobs at risk.

“More than 7 million families are already experiencing unacceptable hardship by going without basic essentials like food, a warm home and adequate clothing, and 2.3 million have gone into debt just to pay for these essentials.

But under today’s prevailing conditions, millions more are just one life event away from needing support to get back on their feet, whether that be losing a job, stopping work to care for a loved one, or being forced to move home.

“Further targeted support from government is now vital. For ministers to cast doubt on whether they will uprate benefits with inflation in full next year is deplorable. But this is just the start, and government must go further, and quickly, to repair a broken and threadbare safety net by ensuring that it always guarantees enough for people to afford the essentials.”

Reaction: British Chambers of Commerce welcomes rate hold but urges Chancellor to set ‘out a plan for growth’

13:30 , Joe Middleton

The British Chambers of Commerce has welcomed the BoE’s decision to hold interest rates today but urged Chancellor Jeremy Hunt to set out a plan for growth in the Autumn Statement.

David Bharier, Head of Research at the British Chambers of Commerce, said: “Today’s decision to again hold the interest rate at 5.25% will allay some concerns of the businesses we speak to that are unable to stomach further rises.

“Our research has shown that interest rates have grown as a key issue among companies. This is especially true for smaller firms and those in the consumer-facing sectors, who have seen rising borrowing costs and decreased customer demand.

“The BCC’s Quarterly Economic Survey for Q3 found that 45% of all firms cited interest rates as a concern. With inflation set to ease further, and GDP and labour market data indicating the economy is cooling, the Chancellor’s Autumn Statement must set out a plan for growth.

“SMEs have been operating in an uncertain climate for too long, with policies constantly chopping and changing over the past few years. They need to see clear direction from decision makers, creating a roadmap for business that really boosts confidence and investment.”

BoE risks keeping interest rates ‘too high for too long’, says think-tank IPPR

13:41 , Joe Middleton

The Bank of England risks keeping interest rates “too high for too long” as the economy and inflation slow over the coming months, say think-tank IPPR.

Carsten Jung, IPPR senior economist, said: “The Bank of England decided to hold rates steady, citing slowing but still persistently high services inflation and pay growth. But the Bank’s rate is still likely too high. The labour market is continuing to loosen, and company insolvencies are at their highest since 2009.

“High rates take more than a year to fully take effect and we will continue to see the economy and inflation slowing over the next months. There is a risk of the Bank keeping rates too high for too long.

“The Bank also is not transparent enough about how it models ‘passthrough’ inflation, nor how it expects corporate profits to evolve – both of which are key for understanding inflation at this point.”

Further industry reaction to BoE’s decision to keep interest rates unchanged at 5.25 per cent

14:00 , Joe Middleton

Managing director of House Buyer Bureau, Chris Hodgkinson, commented: “We’re seeing clear signs that the property market is now starting to stabilise, although transaction levels and sold prices remain down on the historic highs seen in recent years, as the higher cost of borrowing and wider cost of living continue to restrict home buyers.

So today’s decision to hold interest rates should be viewed as a welcome positive for the property market and should allow buyers and sellers alike to act with a greater degree of confidence going into 2024.”

CEO of Octane Capital, Jonathan Samuels, said:“The Bank of England seems to have tamed inflation to a degree, albeit it’s taken considerably longer than it should and remains some way off the two percent target.

Given that there’s still a good bit of work to be done, today’s decision to hold interest rates won’t come as a surprise and we can expect the base rate to remain around five percent for some time yet.

Of course, this ‘new normal’ has historically been the norm anyway and, as home buyers and owners adjust to this latest benchmark of borrowing affordability, we should see the property market stabilise and return to business as usual come 2024.”

BoE’s decision to keep interest rates at 5.25 per cent a ‘safe bet in safeguarding against recession’, says economist

14:20 , Joe Middleton

The Bank of England’s decision to keep interest rates at 5.25 per cent is a “safe bet in safeguarding against recession”, an economist has said.

Professor of Global Economy and Deputy Dean of Cranfield School of Management, Joe Nellis says: “With the UK’s interest rate at its highest level for 15 years and the tax burden at its uppermost limit for a staggering 70 years, it’s clear the economy struggling to gain any momentum.

“As the BoE teeters along the already very precarious economic tightrope, its decision to hold interest rates at 5.25% today (02 November) was a safe bet in safeguarding against recession.

“With companies going bankrupt and international tensions making for a very unstable environment, just a small gust of wind is enough for the BoE to lose its footing and send us into further economic decline. As we look ahead, we must watch and wait with bated breath as the UK’s economic outlook hangs in the balance.”