Interest Rates drop to 4.5%

While borrowers will always welcome a reduction in interest rates, I would normally say this is great at a time like this.  Instead, I would suggest some caution.

The Voting

The voting was as follows.  All 9 members voted to reduce interest this time around.  Two voted for a more aggressive cut of 0.5%.

Why the caution?

The news wasn't just about interest rates being cut.  The news was really why.  Some additional context.

1. UK growth estimates halved from 1.5% to 0.75%
2. Inflation is anticipated to rise up to 3.7% in the first half of 2025

I am not going to go deep and hammer into the details of this suffice to say that lowering growth estimates by half is a tragic statement showing what Labour has done to the economy.  

If that wasn't enough on its own, unemployment is creeping up. Where is all the prosperity we were promised?  Of course, Labour, Conservative or whoever is in power don't have a magic wand to wave and make things change instantly.  Labour changes may prove beneficial in time.  Years time that is.  The Bank of England Governor said himself that Reeves's changes could take years to come through, he suggested 2-3 years.

Many employers are sending a start warning after the recent tax rises.  They will either be hiking prices, cutting jobs or lowering wages.  Some suggest all three will be required or they fold.

Inflation is going to go up, mostly due to labour tax rises and then the rising cost of energy and water.  Not helped by the pound tweaking against the US Dollar.

Great for some

If your mortgage is going to come down or other debt you have, or if you need to borrow in general your rates is likely going to fall a little.  It's great news from that perspective but there is a trade off and it's that the reduction is to try and support our now failing economy.

At this point it feels like we are in a recession but nobody wants to say it.