BoE rate drops 0.25% to 4.75% - adds fuel to the fire

The Property Nomads Podcast

Rob discusses the recent decision by the Bank of England to reduce the base interest rate from 5% to 4.75%, a move that was widely anticipated. He delves into the implications of this rate cut, particularly in light of the government's recent budget, which is expected to stimulate inflation, arguing against the rate reduction, citing historical patterns of inflation and the potential for rising prices due to increased government spending and flawed energy policies.

KEY TAKEAWAYS

• The Bank of England has reduced the base rate from 5% to 4.75%, a 25 basis point cut, which was widely anticipated.
• Despite the rate cut, the Bank of England warns that interest rates may take longer to fall due to rising inflation, influenced by recent government budget decisions.
• The budget is expected to stimulate economic growth but also includes tax increases and measures that could lead to higher prices, contributing to inflation.
• Energy prices are a significant factor in inflation, and the current energy policy is viewed as flawed, which may exacerbate inflationary pressures.
• The Monetary Policy Committee voted 8 to 1 in favor of the rate cut, with one member advocating for rates to remain unchanged due to concerns about inflation stemming from the budget.

BEST MOMENTS

"The Bank of England has reduced the base rate from 5% down to 4.75%. This was widely expected, but what's most interesting are the comments that accompanied the interest rate decision."

"My argument on this podcast has been that the Bank of England shouldn't be reducing rates anyway, because inflation has three waves."

"Although we supposedly had a 22 billion pound black hole, the government have decided to stimulate growth through spending, and with that comes a big bunch of tax increases."

"The inflation measure apparently did fall below the bank's 2% target, but that was always expected to rise again."

"I don't think that rates should be going down at all. They should be going in the other direction because what will happen is that rates will continue to go down and exacerbate inflation."

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