Yesterday the Bank of England鈥檚 Monetary Policy Committee聽 decided, in a split decision, to reduce the bank rate to the lowest level for two years.
The decision was driven by a feeling that economic slowdown is currently a greater threat than inflation.
老九品茶 leaders have been giving their reaction.
Boost for deals market
Hamish Martin, partner at LAVA Advisory Partners, said: 鈥淭he decision is a welcome step forward in this cycle of cautious easing, and might spell the start of open season聽for聽dealmakers after a lengthy period of elevated borrowing costs.
鈥淟ower financing聽rates聽are likely to reanimate both private equity and corporate acquirers across a broad range of sectors, which is especially good news聽for聽rate-sensitive industries like real estate, consumer, and industrials.
鈥淲hile inflation is still above the 2 per cent target and growth is still sluggish, Thursday鈥檚 move is a starting pistol that should help revive deal pipelines that have stalled due to the cost of capital.
鈥淲ith August traditionally quiet, I think we’ll see the real benefits come September, when holidays are over and everyone’s back to work and pushing聽for聽a strong end to the year.”
Bad news for savers
Emma Sterland, chief financial planning officer at wealth management firm Evelyn Partners, said: 鈥淭his probably signals the end of the road聽for聽many savings accounts that currently beat inflation, running at 3.6 per cent in June.
鈥淲e can expect to see savings聽rates聽reduced聽in the coming days and weeks, leaving returns on even the best accounts only marginally positive in real terms – especially after tax.
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鈥淭hat can leave families who want to hold cash in a real quandary.
鈥淲hile everyone should have a cash buffer in a deposit account, some individuals will find themselves wanting to hold more significant cash savings聽for聽a period of time聽for聽a variety of reasons.鈥�
Boost for SMEs
Kai Hunter, non-executive director at SME lender Love Finance, said: 鈥淭he Bank of England cutting聽rates聽to聽4 per cent is a real boost聽for聽UK SMEs.
鈥淎fter a tough couple of years with rising costs and cautious spending, this gives businesses some much-needed breathing space, a chance to plan, invest, and move forward with a bit more confidence.
鈥淚t鈥檚 good to see the momentum finally starting to turn.”
Consumers turn to credit
惭补诲丑耻鈥疜别箩谤颈飞补濒, CEO of TransUnion鈥疷K & Europe, said: 鈥淭he Bank of England鈥檚 decision to聽cut聽interest聽rates聽is a welcome signal聽for聽UK consumer resilience.
鈥淎lthough borrowing costs have risen sharply over the past two years, overall consumer credit volumes remain well below pre-pandemic levels, suggesting that households have been cautious in taking on new debt.
鈥淲e鈥檙e seeing more people use credit to help manage everyday spending. Over one in seven (15 per cent) use buy-now-pay-later (BNPL) for small, routine purchases, including groceries and takeaways. While this can offer short-term flexibility, it may also reflect limited expendable income in some households.鈥�
Tax rise fears
Luther Yeates, head of mortgages at Orton Financial, said: 鈥淲hile it鈥檚 encouraging to see the Bank of England act to stimulate growth, rising taxes on individuals and businesses continue to drag on the economy.
鈥淚t is great to see the bank making moves to stimulate the economy and support growth. But there are still significant downward pressures due to increases in taxation on individuals and businesses. We are unlikely to see any meaningful benefit from the聽reduction聽in base聽rate, and it will instead slow the decline and move towards recession.”