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Rachel Reeves statement will "pretty much end hopes of a Bank of England base rate cut this week"

ended 29. July 2024

Following Chancellor Rachel Reeves' statement this afternoon, Newspage asked experts whether what was revealed could make a rate cut on Thursday more or less likely. Their views are below.

8 responses from the Newspage community

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Andrew Montlake
Managing Director at Coreco
The odds of a rate cut this week rested on fine margins as it was, but the latest statement from the Chancellor and the public sector pay awards may well cause the Bank of England to stay their hand further. Whilst the pay rises themselves are deserved, there is no doubt that they can be seen as inflationary and the type of data that affects an already over-cautious Bank of England.
The movement of the markets will be meticulously watched in the coming days, with every hope that a new era of transparency over the public finances calms rather than irritates the market further, as a rate cut is long overdue.
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Harps Garcha
Director at Brooklyns Financial
Rachel Reeves' speech could be another Truss moment. Most mortgage fixed rates are influenced by swap rates and broader financial market conditions, and Reeves' speech has added to the uncertainty. Prior to her speech, there was a slim chance of an August rate cut, but this possibility now seems further delayed due to uncertainty. Sadly this may have just resulted in the Bank of England kicking the can down the road again.
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Rohit Kohli
Director at The Mortgage Stop
Rachel Reeves has this afternoon handed the Monetary Policy Committee the reason they needed to not take action on interest rates when they meet later this week. With understandable inflation-beating pay rises across the public sector, combined with the abysmal state of the country's finances, we can only hope that this doesn't spook the markets and we see lenders stop cutting rates and start hiking them again.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Pay rises for public sector workers above inflation and the offer to junior doctors, though welcome, may scare MPC members that inflation could soon bounce back. With the government all but declaring the country bankrupt, it certainly makes it more challenging for the Bank of England to immediately reduce the base rate on Thursday.
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Craig Fish
Director at Lodestone Mortgages
A rate cut was already off the cards on Thursday despite what Rachel Reeves said. Whether her statements were true or political point scoring, let's hope the markets don't react too much, and that a rate cut can still happen in September. Public sector pay rises have the potential to be inflationary, which could give the Bank of England pause for thought.
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Michelle Lawson
Director at Lawson Financial
Whilst this news is good for those in receipt of the announced public sector pay rises, it is a bit of an own goal as this will pretty much end hopes of a Bank of England base rate cut this week due to the risk of an inflation spike for the very people who are in need of desperate help to get on the housing ladder or remortgage. Meanwhile, the private sector continues to plod on and hope for something better to come.
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Dariusz Karpowicz
Director at Albion Financial Advice

Chancellor's statement is disappointing and doesn't address any of the pressing housing market issues. If this is a sign of things to come, I'm very concerned about the UK economy and how wider markets will react. Let's hope it was just a blip and that the government will tackle these problems seriously going forward. No sign of a rate cut on the horizon, but maybe they'll surprise us with some positive moves soon. Fingers crossed!
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Elliott Culley
Director at Switch Mortgage Finance
You could argue that pay rises of this magnitude for the public sector makes an interest rate reduction less likely as the Bank of England will be worried about the potential impact on inflation and so far the record has always been to be cautious. However if the economy is as bad as has been said, then keeping interest rates higher for longer will impact its recovery. Will any of today's news actually matter? I think most of the Monetary Policy Commitee will have already made up their mind long before today.