BANK ON IT
Bank of England Governor Andrew Bailey answers YOUR questions from Rachel Reeves’ Budget to Trump’s trade war
Read on to find out when your mortgage may go down
THE Bank of England yesterday lowered interest rates from 4.75 per cent to 4.5, while halving its growth forecasts amid fears about the economy.
The Bank’s Monetary Policy Committee has to perform a delicate balancing act — keeping rates sufficiently high to stop a return of rapid inflation, but not suffocating companies’ plans to invest or people’s hopes of owning a home.
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Those with hefty mortgage bills, however, want to know when interest rates will fall.
So we have given Sun readers a chance to put their questions to the Bank’s boss, …
Q: WE’VE been warned the Budget will cause prices to rise.
The Bank was slow to react to inflation before — why don’t you act pre-emptively this time?
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A: We expect inflation to rise in the coming months, but by much less than during the pandemic and after Russia’s invasion of Ukraine.
The reason for this increase is higher gas prices and utility bills.
But we do think inflation will return to our 2 per cent target, so we’re being gradual and careful in our approach to further rate cuts.
Q: Is there a risk that interest rates could go back up?
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A: We don’t expect rates to go back up in the foreseeable future.
We need to be careful though.
What is the Bank of England base rate and how does it affect me?
Cutting rates too fast or by too much could undermine the progress we’ve made getting inflation down over the past couple of years.
Q: When will my mortgage be cheaper?
A: When we raise interest rates we’re very conscious of the impact that has on homeowners.
But we’re pleased to see higher rates doing their job, and inflation has fallen a lot since its 2022 peak.
This has meant we’ve now been able to cut rates three times since last summer, including today.
This has caused mortgage rates to fall.
Q: What’s the point of tinkering with measly 0.25 per cent interest rate cuts?
A: A 0.25 per cent change in our official interest rate — what we call the “Bank Rate” — might seem small.
But in one way or another the changes affect every household and business across the economy.
And those changes can add up in a big way.
But there is a lot of uncertainty in the world at the moment.
This means we have to take a careful, gradual approach to cutting rates.
'EARS TO THE GROUND'
Q: Are you worried about Donald Trump launching a global trade war?
What would it mean for our economy?
A: As this week has demonstrated it is important to see where the policies of the new US Administration settle.
What happens in the rest of the world matters a lot and we’re watching what’s going on closely.
That said, Britain has a long and very proud history of free trade.
We’ll have to see how things pan out and react flexibly to global developments as they happen.
What I can say with confidence is we will do whatever is needed to make sure inflation is on track to meet the 2 per cent target.
Q: If growth is below expectations, could you make it easier for firms to thrive by cutting interest rates faster?
A: Disappointing growth is something we’re seeing in lots of countries at the moment.
In fact, it’s been a problem around the world since the financial crisis 15 years ago.
The Government has an aim to boost growth. We support them in this endeavour, just as we did the previous Government.
The best thing we can do to support the economy is to ensure low and stable inflation.
You can’t have a strong economy without that.
Cutting rates by too much now would just mean higher inflation and higher interest rates further down the line.
That wouldn’t help anyone in the long run.
Q: Do you think the Bank would benefit from more real world and business experience rather than just academics?
A: Our staff come from a broad range of backgrounds.
It’s not just full of academics — although we do need some of them too!
What’s really valuable is our network of agents all across the UK who meet with thousands of businesses every year to find out what’s really going on.
We can’t just pore over the official economic statistics — we need to have our ears to the ground too.
And on top of that, one of the most enjoyable parts of my job is spending time with businesses all around the country.
In fact, I’ll be doing that next week on my visit to Wales.
Q: Do you think the 2 per cent inflation target could or should be widened or reformed?
A: This has been considered over the years.
My view is that the current target has helped maintain largely low and stable inflation for 20 years, so any changes would need to be carefully considered.
'INDEPENDENT BUT ACCOUNTABLE'
Q: The Bank’s role is to manage inflation through monetary policy but the Government’s fiscal policy, including tax changes, impacts inflation.
Shouldn’t the two work together more closely?
A: I think the framework works well.
The Government and Bank both serve the people of the UK but we have different objectives.
The Bank targets inflation using monetary policy.
It is important that we are independent but accountable for that objective, while the Government raises tax revenues to spend on its priorities.
But that doesn’t mean we work in isolation from each other. We’re in close touch, as you’d expect.
Q: The Bank seems to imply inflation is caused by Brits having better wages, but we need to earn more to afford our mortgage payments.
Will the Bank only be content when unemployment and house repossessions shoot up?
A: We take our decisions very seriously as we know they have a big impact on people’s lives.
No one gains from high inflation.
Those who lose the most are those who can least afford it — on low incomes or in insecure employment.
That’s why we had to raise rates to get inflation back down.
But in comparison with previous periods of high inflation, unemployment and home repossessions have stayed relatively low.
AZ CHIEF: FACTORY UNVIABLE
Astrazeneca says building a £450million vaccine factory stopped being “economically viable” after the Government slashed its offer of support.
The project in Speke, Liverpool, was ditched last week in a blow to Labour growth plans.
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Boss Pascal Soriot said he was “very disappointed”, but denied a rift with Labour, explaining: “We couldn’t make the business case work and couldn’t make the investment economically viable.
"It wasn’t possible for the Government to justify it, which we totally understand, and we said we couldn’t justify it either.”
The last Tory Government pledged £90million in grants, but Labour did not honour that amount.
Science Minister Sir Chris Bryant said the change was because the firm had cut research and development plans at the site.
It comes as AstraZeneca’s annual profits jumped more than a quarter to £7billion.
A LYTTLE M&S HELP
MARKS & SPENCER has hired former Boohoo boss John Lyttle to run its £4billion clothing and home business.
It comes less than two months after Mr Lyttle quit the fast-fashion retailer.
His five roller-coaster years at Boohoo saw a boom and bust in online shopping, and ended with a spying scandal.
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M&S yesterday announced that Richard Price, its clothing and home boss since 2020, plans to retire and pursue a “portfolio career”.
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