Bank of England decision time
The Bank of England is set to make its first rate decision of 2025 on Thursday, 6 February.
Almost all the indications now suggest that the Monetary Policy Committee (MPC) will cut rates.
These indications are well-trodden in the media but include:
- A flatlining economy
- Inflation coming in lower than expected
- The labour market showing signs of actual weakness
- Tax rises
- Miserable retail and consumer confidence
The labour market downturn is the really big one that the Bank will have been waiting to see signs of. While wages are still rising above inflation this is beginning to look a bit anomalous and likely a hangover of catching up with the cost-of-living shock of 2022/23.
Inflation is still above the hallowed 2% target, but it came in softer than expected in any case and should come down. The confounder to this would be important dollar inflation thanks to Trump’s tariffs, but there are significant questions as to how realistic a fear this is.
Further, Labour has hiked taxes, which take effect from April. Fiscal and monetary policy can often work against each other – when one is hiked the other can (but not always should) be cut to maintain the balance. Right now, we have relatively high rates (vs the past) and historically high taxes. One needs to now release some pressure.
Confidence (both economic, business and consumer) is at a real low at the moment. Although some plans are being made to fix growth issues, building a new runway at Heathrow is great, but won’t show the benefit for a long time.
It is within the Bank of England’s gift to inject a bit of good news into the mix. It might be time for that to now happen.
What’s coming up in February
For those who enjoy a tipple there’s bad news is on 1 February as the Alcohol duty freeze introduced in February 2024 ends.
As mentioned, on 6 February, the Bank of England has its latest UK interest rate decision – the first of 2025.
We’ll get an ONS quarterly estimate of GDP on 13 February, while employment and wages from the ONS falls on 18 February and inflation arrives on 19 February. Meanwhile, ONS UK monthly retail sales figures are on 21 February.
On 27 February is Octo Members ProgPlan25, RSA House, London: an event bringing together leading financial planners and practitioners, with a focus on tech stack.
And finally, on 28 February is Work Your Proper Hours Day, marking when the average person who does unpaid overtime finishes the unpaid days they do every year, and starts earning for themselves.
All the best from us here at MRM, Octo and Mouthy Money.