The Bank of England held interest rates steady at 4.25% during its policy meeting yesterday but signalled a growing appetite for easing in the near term. Notably, three members of the Monetary Policy Committee voted in favour of a rate cut—up from two at the previous meeting—suggesting momentum is building toward a potential reduction in August.
UK businesses continue to face a challenging environment, grappling with rising operational costs due to increases in national insurance and the minimum wage. These pressures are tightening profit margins and contributing to a weakening labour market. The UK economy lost 109,000 jobs in May—the sharpest monthly decline since May 2020—underlining the strain on employment. The Bank also projected little or no growth in the labour market over the coming months.
Adding to the downbeat economic signals, UK retail sales data released this morning showed a significant decline in May, with volumes falling by the most since December 2023. Food sales dropped by 5%, while online sales were down 3%. Although consumer confidence has edged higher recently, it’s likely that much of the spending was brought forward into April, with households now becoming more cautious amid ongoing economic headwinds.
The combination of weakening consumer demand, falling employment, and softening inflation pressures suggests the Bank of England may soon have little choice but to begin easing monetary policy to support the economy.
GBP/EUR 1.1692 GBP/USD 1.3466 GBP/AED 4.9464
GBP/AUD 2.0779 GBP/CHF 1.0994 GBP/CAD 1.8453
GBP/NZD 2.2475 EUR/USD 1.1503 GBP/ZAR 24.2930