Into the Light – MPC cuts UK interest rates

Into the Light – MPC cuts UK interest rates

After 20 consecutive increases followed by 7 consecutive holds, the possibility of a further two rate reductions before the end of the year is looking more likely. The decision to cut today was only carried by a 5 to 4 majority but the post-meeting commentary indicates that there was broad agreement that continued weakness in headline inflation is expected. Inflation has not gone away and it would be foolish to think that there will not be months where the measurement ticks up again but the consensus is that Central Banks have managed, belatedly, to get the genie back in the bottle and the future progression of interest rates looks like a one-way bet, at least through the remainder of this year and 2025.

The backdrop of Political stability in the UK, combined with on-target inflation and reducing interest rates will help to bring confidence to homeowners and businesses alike. We have already seen the impact that the expectation of interest rate reductions has brought to equity markets and we would hope to see continued progress in the valuation of risk assets now we are at the start of a rate reduction cycle.

It has been a long and difficult investment journey since the dark days of COVID19, lockdowns and market turbulence, today offers some relief that better times are on the way.