UK moves slowly towards rate cuts: Bank of England caution bad for businesses and first-time home buyers, says ALEX BRUMMER

European consumers and businesses can expect relief from the relentless economic gloom today when the Frankfurt-based central bank delivers its fourth interest rate cut this year.

The European Central Bank (ECB) is likely to be joined by the US Federal Reserve, which is expected to give a boost to a car economy, with a reduction next week of its key quarter-year interest rate. percentage point.

It is unlikely that there will be any pre-Christmas gifts from Governor Andrew Bailey and the Bank of England on December 19.

The October budget has scared the Bank. Rate-setters are concerned that increased national insurance contributions (NICs) from employers will end up being passed on to consumers.

There are also rumors from public sector unions that, despite receiving pay deals to reduce inflation in July, the proposed cap of 2.8 per cent in 2025-26 will not be enough. Fear of a price-wage spiral is in Britain’s DNA.

Despite the best efforts of Keir Starmer and Rachel Reeves to make us all miserable about the British economy, private sector forecaster Capital Economics is confident that the UK could leave its European neighbors behind in 2025 and 2026.

Growth is forecast to accelerate from just under 1 percent this year to 1.6 percent next year and in 2026.

The Bank is very cautious on inflation after the debacle of keeping rates too low for too long after the pandemic.

So far all indications are that the monetary policy committee will leave the UK’s key rate unchanged at 4.75 percent on December 19.

The gap between ECB rates, which are expected to fall from 3.25 percent to 3 percent, and Britain’s is widening.

Similarly, rising consumer prices in the United States are unlikely to prevent the Federal Reserve from reducing its key range to between 4.25 and 4.50 percent. If the Old Lady were more adventurous, she would support the expansion.

A cut next week would lift consumer sentiment in the final hectic days before the holidays, ease pressure on businesses from rising NICs and strengthen the property market.

Simpler planning rules can make construction easier, but it won’t do much good if there are no buyers.

Current mortgage rates make it impossible for people between 18 and 40 to access housing.

A lack of joined-up thinking means a government promising to build 1.5 million homes in this Parliament is cutting stamp duty relief for first-time buyers.

Keeping UK interest rates above those of its European competitors has taken the value of the pound against the euro to an eight-year high of €1.2157.

This could be good for tourists heading to the slopes. But it will not make it easier to sell excellent British goods and services on the continent.

deep dive

Business Secretary Jonathan Reynolds believes Daniel Kretinsky, the potential buyer of Royal Mail, is a legitimate businessman.

But even if Britain ignores the tycoon’s entanglements with Russia, the EU may have its own different concerns.

Brussels has set a deadline of January 21 to decide whether to open a second full investigation into the £3.6bn bid for International Distribution Services, the owner of Royal Mail.

Additionally, Kretinsky’s bid will also need to pass foreign subsidy rules. The aim is to determine whether funds from foreign companies distort EU markets.

One possibility is that money from rising first-class stamp prices is paying for the investment in parcel unit Global Logistics Services.

In agreements with the “Czech Sphinx” no envelope should be left unopened.

after life

Clive Cowdery has done it again. The insurance executive is a master at buying up boring old life insurance companies, packaging them into a neat package, and selling them for a lot of money.

The impact on unsuspecting policyholders, when savings are passed around like an old vase at an antiques fair, is less clear.

This time, Cowdery is selling Resolution Life to Japan’s Nippon Life in a deal that values ​​the company at £8.48 billion.

Cowdery’s advisers remain tight-lipped about how much our hero is pocketing.

Sensible. If he were honest, policyholders could demand action.