Bank of England leaves interest rates on hold
Newsflash: The Bank of England has left UK interest rates on hold at 4.5%, despite concerns that trade conflict could hurt economic growth.
Faced with the dilemma of a slowing economy on one hand, and rising inflation on the other, the Bank’s policymakers have sat on their hands.
The Bank’s monetary policy committee was split, though, 8-1.
One member, Swati Dhingra, voted for a quarter-point cut to Bank rate to 4.25%.
But the other eight members voted for no change, including Catherine Mann who had surprised the City last month by voting with Dhingra for a large rate cut.
Announcing the decision, the Bank says:
As the Committee noted in February, there has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations. That progress has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory so as to continue to squeeze out persistent inflationary pressures.
Since the MPC’s previous meeting, global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded. Other geopolitical uncertainties have also increased and indicators of financial market volatility have risen globally. The German government has announced plans for significant reform to its fiscal rules.
Key events
It’s traditional at this time on a Bank of England day to report that tension is rising in the City ahead of the interest rate decision at noon.
But it’s not really accurate today, though.
Investors are confident the Bank will leave rates on hold at 4.5%, with the money markets still indicating there’s a 96% of no change today, and just 4% for a cut.
Kit Juckes, currency expert at Société Générale, says:
The last of today’s central bank meetings will be in the UK at lunchtime.
The market prices two 25bp cuts this year but a move today seems very unlikely. Headline CPI inflation at 3%, and the inflation rates for rental accommodation, education, holidays, and restaurants are all a good bit higher than that.
How can rates be cut against that backdrop? Especially when there is so much uncertain about what is happening in the labour market.
In the gambling world, British bookmaker Corbett has been fined almost £700,000 for social responsibility and anti-money laundering (AML) failings.
The Gambling Commission said Corbett had agreed to pay a £686,070 penalty for failures identified during an investigation into the bookmaker’s AML and safer gambling policies, procedures and controls.
In one breach, the company – which operates 36 betting locations in Britain – failed to identify a customer who staked £23,674 in a 13-day period as someone who may be at risk of gambling harm.
Corbett also allowed a customer to stake £47,000 and lose £14,000 during an eight-month period, without verifying the player’s source of funds.
John Pierce, director of enforcement at the Gambling Commission, said:
“This operator has failed to adhere to vital regulations designed to make gambling safer and free from criminal activity.
As a result, it will not only pay a significant fine but also undergo a rigorous audit to ensure full compliance with anti-money laundering and safer gambling measures.
In addition to the remedial actions already taken, we expect the operator to swiftly and fully implement the audit recommendations, demonstrating clear and measurable improvements in both policy and practice.
Failure to do so will prompt our compliance team to reassess the situation and take further action as necessary.
All operators should carefully consider this case and the price this operator is now paying.”
News of the Cybertruck recall comes as one of Tesla’s louder supporters on Wall Street says Elon Musk needs to cut back on his work at the White House.
Dan Ives, the managing director at the US financial firm Wedbush and a self-described Tesla “core bull”, said Musk’s role leading Doge was damaging the multibillionaire’s personal reputation and the business he runs.
Here’s the full story.
Tesla to recall more than 46,000 Cybertrucks due to exterior panels falling off
Elon Musk’s boast that Tesla’s Cybertruck is “apocalypse-proof” has taken a knock, with the news today that 46,000 units are being recalled to fix a problem with exterior panels falling off.
The recall is over issues with the Cybertruck’s “cant rail” – a stainless-steel exterior trim panel – which can delaminate and detach from the vehicle.
The US National Highway Traffic Safety Administration says:
Tesla service will replace the cant rail assembly, free of charge. Owner notification letters are expected to be mailed May 19, 2025.
Global debt exceeds $100 trillion as interest costs keep rising, OECD says
The combined debt pile of government and corporate borrowing has hit $100trn, the OECD thinktank has warned, as rising interest rates squeeze borrowers.
In a new report into debt, the OECD shows that sovereign and corporate bond borrowing rose to $25trillion in 2024, nearly three times as much as back in 2007 before the financial crisis.
The OECD says:
This increase is largely the legacy of the 2008 global financial crisis and the COVID-19 pandemic, in response to which large fiscal support packages, mainly funded via debt markets, helped avoid deeper recessions.
These debt piles are becoming more expensive to service, due to the increase in interest rates since the recent inflation spike.
As a result, the ratio of interest payments to GDP increased in about two-thirds of OECD countries in 2024, reaching 3.3% on aggregate, an increase of 0.3 percentage points compared to 2023.
Between 2021 and 2024, interest costs to GDP increased from the lowest to highest level in the last 20 years, the OECD warns.
Spending on interest payments is now greater than government expenditure on defence across the OECD, at a time when European governments are under pressure to boost spending on weapons.
LME fined £9.2m for nickel trading debacle
Newsflash: The London Metal Exchange has been £9.2m over the nickel trading debacle three years ago.
The Financial Conduct Authority has ruled that the LME failed to ensure its systems and controls were adequate to deal with the severe market stress that gripped the nickel market in March 2022.
The LME was forced to suspend nickel trading for more than a week, and to controversially cancel some trades, after the nickel price doubled in a few hours.
The FCA reveals that the LME only had junior staff on duty when the nickel price began to bubble….
During LME’s ‘Asian trading’ hours, from 1am to 7am GMT, only relatively junior trading operations staff were on duty. They had not been trained to recognise anything other than error trades or rogue algorithms as potential causes of a disorderly market.
This meant that when price rises in the nickel contract became increasingly extreme during the early hours of 8 March it was not escalated to senior LME managers. Instead, trading operations staff took steps to accommodate the price rises, even disabling the price bands, during the most extreme period of volatility.
This is the FCA’s first enforcement action and fine against a “recognised investment exchange”. The LME accepted the findings, and thus won a 30% cut to the fine.
Sweden’s Riksbank has left interest rates on hold, at 2.25%.
Switzerland’s central bank has cut interest rates, and warned that global economic uncertainty is rising.
The Swiss National Bank has lowered its key interest rate by a quarter of one percentage point, to 0.25%.
Announcing the move, SNB chairman Martin Schlegel said that uncertainty about the development of the global economy and inflation has increased “significantly”.
“As a result, the outlook for inflation in Switzerland, too, is currently very uncertain. At present, the risks are predominantly to the downside.
“In light of the heightened uncertainty we will continue to monitor the situation closely, and adjust our monetary policy if necessary.”
#SNB cuts policy rate by 25bp as expected. Importantly, it argues that the cut ensures that monetary policy remains #APPROPRIATE given low inflationary pressure. It also increased the inflation projection to 0.8% for Q3 &Q4 2027. Both indicate that no rate cut is likely in June. pic.twitter.com/6VkE7CFrCT
— Karsten Junius (@KarstenJunius) March 20, 2025
Yorkshire Water pays out £40m over sewage failings
Yorkshire Water has been forced to pay out £40m to address failings over wastewater and sewage by regulator Ofwat.
The industry watchdog said a probe into the company found “serious failures” over how it operated and maintained its sewage network.
Ofwat said this resulted in excessive spills from storm overflows.
The regulator said Yorkshire Water has admitted to its failings and agreed to the enforcement package as a result.
Lynn Parker, senior director for enforcement at Ofwat, said:
“Our investigation has found serious failures in how Yorkshire Water has operated and maintained its sewage works and networks, which has resulted in excessive spills from storm overflows.
“This is a significant breach and is unacceptable.
“We are pleased that Yorkshire Water has recognised this failure and is taking steps to put it right for the benefit of customers and the environment.
“We now expect them to move at pace to correct the remaining issues our investigation has identified.”
Nicola Shaw, chief executive of Yorkshire Water, said:
“We know our storm overflows operate more frequently than we, or our customers, would like them to.
“Since 2021, we’ve been actively taking steps to improve our performance.
“We know there’s still more for us to do.
“We’re at the forefront of the industry to get this resolved and we’re looking forward to delivering our ambitious plans to improve river health in Yorkshire.
“We apologise for our past mistakes and hope this redress package goes some way to show our commitment to improving the environment.”
The London stock market is calm as investors await the Bank of England’s announcement at noon today.
The FTSE 100 share index is down 2 points, or 0.03%, at 8704 points.
Investment trust Pershing Square Holdings are the top riser, up 2.5%, after a rally on Wall Street last night.
Retailers and housebuilders are also in the risers.
On the smaller FTSE 250 index, construction firm Crest Nicholson are up 11% after reporting “an encouraging start to the year”, with sales rates higher in the last 10 weeks.
Monica George Michail, associate economist at NIESR, predicts wage growth will continue to slows:
Today’s figures show that annual regular wage growth remains strong at 5.9% in the three months to January 2025, and 5.8% if we include bonuses. Despite falling vacancies, pay growth continues to outpace inflation as workers seek to secure higher wages due to elevated living costs, in addition to the impact of previous hikes to the national minimum/living wage.
We forecast growth in regular wages to moderately slow but remain elevated at 5.4% in the first quarter of 2025, contributing to the Bank of England’s continued caution with regards to interest rate cuts”.
Growth in regular average weekly earnings, excluding bonuses, remains strong at 5.9% in January 2025. pic.twitter.com/4mCkUt3Mes
— National Institute of Economic and Social Research (@NIESRorg) March 20, 2025
As nominal wage growth continues to outpace inflation, workers are making positive real income gains. pic.twitter.com/uHku8Y7PvH
— National Institute of Economic and Social Research (@NIESRorg) March 20, 2025
Given the gradual decline in the vacancy-to-unemployment ratio, we forecast wage pressures to moderately ease but remain elevated, with regular pay growth at 5.4% in Q1 2025. pic.twitter.com/EW1E3Y00kf
— National Institute of Economic and Social Research (@NIESRorg) March 20, 2025
Looking back at this morning’s jobs figures, ING’s developed markets economist James Smith, says the labour market is proving “resilient” in the face of employer tax rises that kick in next month.
Smith tells clients:
“The mood music surrounding the UK jobs market isn’t good. Survey after survey has pointed to weaker hiring appetite and in some cases, layoffs, ahead of a sharp rise in employer taxation next month. But so far, that doesn’t seem to be having any material impact on the official data we’re getting on the labour market. Private sector employment is more-or-less flat, having gently fallen through 2024, if we look at the payroll-based numbers and exclude government-heavy sectors. Vacancy levels have flattened out too around pre-Covid levels, and that goes for sectors that you’d expect to be more sensitive to the tax hikes (hospitality and retail).
“Redundancies similarly show little sign of change. Employers are required to notify the government if they are laying off more than 20 staff members at any given site, via a HR1 form. These notifications haven’t discernibly increased over recent weeks.
“This picture could of course change, not least because neither the tax hike nor the near-7% rise in the National Living Wage have kicked in yet. But thinking about the Bank of England decision later today, there’s no clear impetus here for a greater number of officials to back a faster pace of rate cuts.”
