Jeremy Hunt has said that tax cuts are “virtually impossible” despite the Government borrowing less-than-expected this year.
In an interview with LBC, the Chancellor said he faces difficult decisions ahead of the Autumn Statement in November.
Commenting on the lack of fiscal headroom he expects to have, Mr Hunt said: “It makes life extremely difficult, it makes tax cuts virtually impossible and it means that I will have another set of, frankly, very difficult decisions.”
His comments came as Mr Hunt faces pressure to cut taxes after the Government borrowed £11.4bn less than expected so far this financial year.
Public sector borrowing in the first five months of the current financial year was £69.6bn, according to the Office for National Statistics (ONS), which was 14pc below the Office for Budget Responsibility (OBR)’s March forecast.
This is because higher revenues from the Exchequer’s stealth tax raid helped to offset a surge in borrowing.
However, Government borrowing surged year-on-year in August and was much higher than economists had anticipated.
Last month, total public sector net borrowing excluding public sector banks was £11.6bn.
This was £3.5bn more than the same month last year and the fourth-highest August deficit since monthly records began in 1993.
It also exceeded the consensus expectation of £11.1bn but was £1.4bn less than the OBR forecast back in March.
07:34 PM BST
See you tomorrow
That’s all from us. Before I go, let’s take a look at the markets.
Wall Street stocks are trading down after the Federal Reserve decided yesterday to keep interest rates at a 22-year high.
The Dow Jones Industrial Average is currently down 0.68pc at 34,207.63. The S&P 500 has fallen 1.22pc to 4,348.33. The Nasdaq composite is currently down 1.37pc at13,284.72.
Meanwhile, London’s markets finished lower today despite the Bank of England holding interest rates for the first time since 2021, which weighed on the value of the pound.
The FTSE 100 moved 0.69pc, or 53.03 points, lower to finish at 7,678.62.
07:22 PM BST
Men more negative than women about economic impact of net zero
Men are more pessimistic about how net zero will affect the economy, while women have greater concerns about the climate, according to a government survey.
Senior economics reporter Eir Nolsøe reports...
Some 43pc of men believe the transition to lower carbon emissions will be bad for the economy in the short term, while over a fifth - 22pc - also expect it to be negative over a longer period.
Among women, only 30pc anticipate the economy will suffer temporarily as a result and 13pc say it will be damaging in the long term. However, a greater share of women than men said they were unsure.
However, women are more likely to say they are very or fairly concerned about climate change than men at 85pc to 78pc.
The findings, from a survey of more than 4,000 people polled this summer, were published after Rishi Sunak on Wednesday was accused of watering down the UK’s net-zero commitments.
The Prime Minister, whose party is 22 percentage points behind Labour in the polls, said he would spare the public from the “unacceptable costs” of net zero and that politicians should be more honest about the price-tag involved.
The move will likely become one of the key battlegrounds in the general election, but also sparked a backlash within the Tory party.
The study on public attitudes to net zero and the economy published on Thursday gave some clues as to why the Prime Minister believes it was the right decision ahead of the election.
Across all Britons, around two in five people believe net zero will harm the economy temporarily, while one in five say it will be beneficial.
Meanwhile, seven in 10 people believe living costs would have to rise in the next one to two years from moving to a lower-carbon economy.
This comes as separate analysis shows that since Liz Truss’s mini-Budget of 2022, voters have considered Labour more competent in handling the economy than the Conservatives.
Even when taking a longer view of 10 years from now, just under half of Britons still believe the transition will make their expenses higher.
This is despite the fact that renewables are expected to bring cheaper energy eventually. Electric cars are also typically cheaper to run and are predicted to fall in price as production increases.
Most people believed that 10 years from now net zero would be positive for the wider economy, compared with only 18pc saying it will be negative.
The figures suggest that Mr Sunak is hoping that voters currently enduring rising living costs and the highest interest rates in 15 years will be more concerned with their immediate situation.
07:21 PM BST
Jaguar signs EV charging deal with Tesla in US
Jaguar has signed an electric vehicle charging deal with Tesla in the US.
Drivers of Jaguar’s electric vehicles will be able to access Tesla’s network of 12,000 superchargers in the US, Canada and Mexico.
The luxury brand, which is owned by British car maker Jaguar Land Rover (JLR), is seeking to go fully electric by 2025.
The shift sees Jaguar become a high-end competitor to Tesla, led by billionaire Elon Musk.
Mark Camilleri, director of electrification services at JLR, said on Thursday: “Whilst most charging takes place at home, when away from home, our clients want access to fast, reliable and convenient chargers.
“Tesla has created a charging network across the globe that delivers this, and we are delighted to be working with them to provide access for Jaguar clients.”
06:56 PM BST
Dublin Airport operator responds to Ryanair's reduced winter schedule
The operator of Dublin Airport, DDA, has responded to Ryanair’s claims that it has increased passenger charges by 45pc.
The low-cost carrier has cancelled 17 routes for winter and relocated 19 aircraft to alternative EU airports which it claimed incentivises airlines with quieter, lower emission aircraft.
Kenny Jacobs, the chief executive of DDA, said:
I love Ryanair and I love the way they sometimes won’t let the facts get in the way of a good story. It is a false claim that charges at Dublin Airport are to increase by 45pc in 2024.
While the IAA has determined that charges can go up by 6pc, we would welcome a bigger increase in charges to allow us to invest more in the service we give our passengers, but we do not set the charges.”
I am surprised that Ryanair would seek to reconfigure its based aircraft at Dublin Airport this winter when they could pay even lower ultra-low-cost charges in 2024 (VS 2023) if they choose to avail of our sustainability incentives.
Ryanair’s claim that Dublin Airport offers no incentives to airlines is also false. A traffic recovery scheme is in place at Dublin Airport that has worked incredibly well and has facilitated the speedy 100pc bounce back in activity at Dublin Airport post-Covid. This scheme will remain in place for another 6 months.
As the biggest beneficiary of the TRSS scheme, we can understand why Ryanair would like to see it remain in place beyond next March, but we are happy that Dublin Airport’s growth has recovered to pre-pandemic levels and we do not need to incentivise new growth given Dublin Airport has a planning capacity limit of 32 million passengers per annum.
06:29 PM BST
Ocado suffers biggest slump in 11 years after broker downgrade
Ocado’s share price suffered its worst drop in 11 years on Thursday after it was downgraded by a City broker.
Senior reporter Daniel Woolfson has more:
The technology and retail business’s stock was down almost 20pc as markets closed on Thursday, after BNP Paribas Exane analyst Andrew Gwynn published a note downgrading the company from “neutral” to “underperform” just three months after he had upgraded it.
The plunge comes after a long upswing for Ocado’s shares, which have been steadily rising over the last six months amid speculation of a potential takeover by Amazon and the settlement of a three-year patent dispute over robotic warehousing technology with tech company AutoStore.
Mr Gwynn said the recent rally had left the risk versus reward “out of kilter” and said a takeover bid “now seems a lower probability event to us”.
Ocado is best known for its grocery business in the UK, which it runs as a joint venture with Marks & Spencer. The company also offers online retail, logistics, robotics and warehousing services to other retailers across the world, licensing out what it calls its Smart Platform for them to use.
Mr Gwynn said: “Ocado’s retail business, a 50:50 JV with M&S, may not be a big part of valuation (20pc of EV) but it is an important part of the story acting as the showroom for potential partners. Persistently subdued trading does not demonstrate a strong consumer use case and if the consumer case is weak, so too is the retailer’s to buy into the ‘Ocado Smart Platform’.”
He added that the retirement of Ocado’s Solutions boss Luke Jensen, who will leave the business this month, “does not point to an overflowing order book” in the robotic warehouse unit.
After a significant surge in sales during the pandemic, Ocado’s grocery business has struggled with falling demand since restrictions eased, and was hit by its first ever annual fall in grocery sales in 2022 as shoppers scaled back their purchases amid the cost of living crisis.
Ocado Retail said on Tuesday that sales had risen 7.2pc to £569.6m in the third quarter and that the volume of goods it sold rose - although the number of items in its average basket fell from 45 to 44 compared with the same three months last year.
Hannah Gibson, the chief executive of Ocado Retail, said the grocer would place a greater focus on M&S products from now on.
She said it was working to make sure the M&S brand had a “greater share of product space” on its website, and would be “talking more about M&S” as Christmas approaches.
Mr Gwynn added: “As we move away from the M&A speculation with nothing new to add, the prospects of excitement there ebbs away too,” he said. “After its bounce therefore, we expect another period where Ocado’s shares slide downward.”
Ocado declined to comment.
06:14 PM BST
Putin plots windfall tax to prop up war economy
Vladimir Putin is preparing to introduce a windfall tax on Russia’s metals and mining firms to shore up the country’s war economy.
Russia’s finance ministry is plotting a levy on exporters which would come into effect if the rouble weakens further against the US dollar, Bloomberg reported.
The proposals, which are not final, will exclude key export sectors such as oil, gas and grain, meaning Russia’s metal and mining industries will be hardest hit.
Drops in the domestic currency increase revenue for Russian exporters, but the new tax will look to funnel around $1bn (£810m) of these extra profits into the public finances each month.
05:36 PM BST
Nuclear waste site forced to claw back £2m in pay from staff after bonus blunder
Around 11,000 workers at Sellafield’s nuclear waste site will be forced to repay £2.1m after a management blunder saw them paid too big a bonus.
Energy editor Jonathan Leake reports:
Sellafield, the UK’s largest nuclear decommissioning site, pays out bonuses based on how successful workers are in storing dangerous radioactive substances.
The £2.1m award, equivalent to £200 per worker, was handed out several months ago following work carried out at one of one of Sellafield’s most dangerous buildings, the Pile Fuel Cladding Silo.
Sellafield, formerly known as Windscale, was built in Cumbria more than 70 years ago.
Its design was based on an agricultural grain silo but was instead used to store some of the UK’s most dangerous nuclear waste.
The contents now include cladding from several dismantled nuclear reactors - all highly radioactive - which needs to be removed using a specially constructed overhead crane.
Sellafield, which racks up £2.5 billion in costs each year and is funded almost entirely by the taxpayer, handed out the £2.1m bonus to reward workers for removing waste.
However, it subsequently emerged that the crane required to do so had been broken for months, meaning no waste had been extracted.
The Sellafield site covers 265 hectares, including 200 nuclear facilities and 1,000 buildings, making it the largest site of its kind in Europe.
Its past activities have included nuclear power generation and fuel reprocessing but it is now focused on waste management and decommissioning.
The UK’s 140-tonne stockpile of plutonium is also kept on the site.
Sellafield’s management is negotiating with unions on how best to claw back the overpayment.
“We are exploring the most appropriate mechanism for reclaiming the overpayment and remain in close contact on this issue with the trade unions and with the Nuclear Decommissioning Authority,” said the company in its annual review.
However, the plan to recoup cash is facing resistance from Prospect, the largest union at Sellafield.
Mike Clancy, general secretary of Prospect, said: “Any move to reclaim money in the middle of a cost-of-living crisis would be unfair and unjust.”
Tony Meggs, chairman of Sellafield, said “Every pound we spend is a pound that is not invested in other public services, such as health, education, and care.
“It is therefore right that we are taking steps to reclaim an overpayment that was made to our employees in the bonus payment for the 2022/23 financial year, and that we take steps to improve our governance arrangements to ensure that it does not happen again.”
Last year it emerged that seven workers at the site had tested positive for drugs, raising questions over safety.
The positive tests followed random testing on 741 workers between November 2021 and November 2022.
05:06 PM BST
Hunt: Interest rate pause is 'good news for businesses'
Jeremy Hunt has said that the Bank of England’s decision to hold interest rates unchanged is ‘good news for businesses’.
In an interview with LBC, the Chancellor said:
It’s good news for families. It’s good news for businesses. What it says is the Bank of England thinks we may have hit the peak. But Andrew Bailey, the Governor of Bank of England has been very clear we cannot be complacent. And what I would say to your listeners, Andrew is that the fight against inflation never happens in a straight line. There are always ups and downs, but the big picture is that we are finally starting to win this battle
04:32 PM BST
Jeremy Hunt faces 'very difficult decisions' ahead of Autumn Statement
Jeremy Hunt has warned that he faces ‘very difficult decisions’ ahead of the Autumn Statement in November.
In an interview with LBC, the Chancellor said:
If you look at what we are having to pay for our long-term debt, it is higher now than it was at the Spring Budget.
I wish it wasn’t, it makes life extremely difficult, it makes tax cuts virtually impossible, and it means that I will have another set as frankly very difficult decisions.
All I would say is if we do want those long-term debt costs to come down, then we need to really stick to this plan to get inflation down, get interest rates down.
I don’t know when that’s going to happen. But I don’t think it’s going to happen before the Autumn Statement on November 22nd.
03:42 PM BST
Google sued by family of man who drove off collapsed bridge while following Maps
The family of a man who died after driving his car off a collapsed bridge while following directions from Google Maps is suing the technology giant for negligence.
Philip Paxson, a father of two from North Carolina, drowned last year when his Jeep plunged 20ft into a river from a bridge that collapsed nine years ago.
His family alleges that Google Maps directed him across the bridge as he was driving home on an unfamiliar route from his daughter’s ninth birthday.
03:31 PM BST
That’s all from me today. Adam Mawardi will take things from here and make sure you stay informed for the rest of the day.
I’ll leave you with a look at the markets after an eventful day in which the Bank of England held interest rates at 5.25pc, ending a streak of 14 consecutive increases.
Having recovered immediately after the decision, the FTSE 100 is down 0.2pc as markets get used to the idea of interest rates remaining higher for longer in the UK and the US.
The Nasdaq has led declines on Wall Street as a jump in Treasury yields knocked down growth stocks after the Federal Reserve signalled that another rate hike was in the offing this year.
The Dow Jones Industrial Average was down 0.5pc, the S&P 500 was down 0.9pc and the Nasdaq Composite has dropped 1.1pc.
In the currency markets, the pound remains down 0.5pc at its lowest levels since March, having slumped toward $1.22.
Government borrowing costs have jumped, with the yield on 10-year UK gilts climbing eight basis points to 4.29pc.
03:24 PM BST
Upper Crust sales take off after return of air travel
Upper Crust owner SSP has said it expects revenue to be at the higher side of previous guidance this year as it benefited from a recovery in air travel.
The company said revenue and underlying pre-tax earnings before charges would “be at the upper of the planning assumptions” provided in December 2022.
In a statement to shareholders the food business pointed to a “continued recovery in passenger numbers” for why revenues have strengthened in recent months.
It said it expects that revenue for mid-June to the end of September will be 16pc higher than the same period last year when offsetting for currency changes.
This is better than in the 10 weeks to June 11, when revenue was only up 12pc year-on-year.
03:09 PM BST
US home sales fall but jobs market remains strong
Sales of US homes crept down further in August, industry data showed, as supply remained limited while mortgage rates stayed high.
Sales of existing homes have cooled in the world’s largest economy as interest rates have surged, pushing up costs for new buyers and making it less attractive for home owners to put their properties on sale after having locked in lower rates previously.
Existing home sales hit an annual rate of 4.04m last month, seasonally adjusted, slipping 0.7pc from July according to the National Association of Realtors (NAR).
It comes as separate data showed applications for US unemployment benefits fell to the lowest level since January last week, indicating a healthy jobs market that continues to support the economy.
Initial jobless claims dropped by 20,000 to 201,000 in the week ending September 16, returning to within striking distance of the lowest level in more than five decades, according to the Labor Department.
The figures have raised hopes that the US economy will avoid a recession and achieve a “soft landing”:
Jobless claims (as a % of the workforce) are rly low
and they tend to rise quickly before recessions
This is the biggest recession indicator I'm watching, and it's barely budging pic.twitter.com/l6Bn43rrFX
— Callie Cox (@callieabost) September 21, 2023
02:48 PM BST
Arm shares dip below offer price
Arm shares fell as much as 3.7pc after the opening bell on Wall Street to drop below the company’s initial public offering (IPO) price.
The Cambridge-based chipmaker listed in New York to much fanfare earlier this month after pricing at $51, jumping to an intraday high of $69 after its debut.
However, the Softbank owned company has experienced a selloff since, dealing a blow to hopes that the market for listings was rebounding.
02:40 PM BST
Murdoch: I am in robust health
In a message to employees, Rupert Murdoch said the companies were in “robust health, as am I”, but added: “The battle for the freedom of speech and, ultimately, the freedom of thought, has never been more intense.”
Here is how Fox News announced Mr Murdoch’s decision to step back as chairman of Fox and News Corp:
Here's how Fox News announced the news about Rupert Murdoch pic.twitter.com/eSSYslHg50
— Brian Stelter (@brianstelter) September 21, 2023
02:37 PM BST
Murdoch says staff have 'every reason to be optimistic'
Rupert Murdoch has told staff at News Corp and Fox that they have “every reason to be optimistic in the coming years” as he steps down as chairman of the two companies.
Here is his letter in full:
BREAKING: My boss Rupert Murdoch is retiring. pic.twitter.com/vpgHUfNnx6
— Piers Morgan (@piersmorgan) September 21, 2023
02:33 PM BST
Wall Street slumps at opening bell
US stock markets opened lower as a jump in Treasury yields knocked down growth stocks after the Federal Reserve signalled that another interest rise is in the offing this year.
The Dow Jones Industrial Average fell 108.65 points, or 0.3pc, at the open to 34,332.23.
The S&P 500 opened lower by 27.84 points, or 0.6pc, at 4,374.36, while the Nasdaq Composite dropped 141.07 points, or 1.1pc, to 13,328.06 at the opening bell.
02:17 PM BST
Rupert Murdoch steps down as chairman of News Corp and Fox
Rupert Murdoch is stepping down as chairman of News Corp and Fox after almost seven decades at the helm of his media empire.
In a statement, the companies announced that the 92-year-old will step down as chairman of each board at upcoming annual general meetings next month.
He will take up the role of chairman emeritus of both companies, while his son Lachlan will become sole chairman of News Corp and continue as executive chairman and chief executive of Fox.
02:12 PM BST
Bank of England to offload £100bn of UK gilts
The other major news today from the Bank of England is that it will step up the pace of its unwinding of quantitative easing.
The Monetary Policy Committee said the Bank will reduce its stock of UK government bonds by £100bn over the next year, taking its total to £658bn.
The rundown, which will be a mix of allowing the bonds to mature and sales, known as quantitative tightening (QT), will be at a faster pace than the £80bn reduction in gilts in the first year of its scaling back of its portfolio of government debt.
Martin Beck, chief economic adviser at EY Club, said: “A faster pace of QT will add to the pressures faced by the public finances, since the Treasury is committed to indemnifying the Bank of England on any losses made on gilts at the point of sale, at a time when gilt issuance is already high.”
The Bank of England said it would be careful to make sure the sale do “not to disrupt the functioning of financial markets”.
The Bank’s quantitative easing programme, launched in 2009 in the wake of the global financial crisis, peaked at £875bn of gilts and £20bn of corporate bonds in 2021.
01:58 PM BST
Bank of England 'is done with rate hikes'
Investment bank Jefferies has added another voice to the chorus of economists predicting that the UK has come to the end of this cycle of interest rate rises.
Chief European economist Mohit Kumar said:
The Bank of England kept rates on hold, but it was a close call with 5-4 vote. It was a hawkish pause with The Bank of England keeping the door open for future hikes, if inflationary pressure persists. The size of quantitative tightening was also increased to £100bn over the next 12 months.
In our view, The Bank of England is done with rate hikes, with a peak in rates of 5.25pc in this business cycle, and the focus is now on keeping rates at these levels for an extended period.
Inflation will remain high, with below 2pc level probably a second half of 2025 story, which will prevent cuts anytime soon. We do not see cuts before the second half of 2024.
01:51 PM BST
Bank of England will be in sight of 2pc target next year, says IoD
Kitty Ussher, chief economist at the Institute of Directors, said another increase in interest rates would have risked an “overdose” before the existing medicine had taken effect. She said:
Business leaders will welcome today’s decision to keep interest rates on hold. It has become increasingly clear over the summer that the Bank’s action to date is having the desired effect of constraining demand and bringing down inflation expectations. That’s why, for the first time, the IoD called for a pause today.
The economy shrank in July and both core and services inflation came in lower than expected in August. This combined with a more difficult external environment, negative PMI results, a weakening labour market and the anticipated fall in the Ofgem energy price cap in October means that inflation is likely to be substantially lower by the end of the year, and within sight of the Bank of England’s 2pc medium-term target in 2024.
To tighten further would therefore have risked administering an overdose before the existing medicine has had enough time to fully take effect. This is not to say that further calibration may not be needed in future, but it is too early to make that judgement today.
01:44 PM BST
Bank of England 'unlikely to be in a hurry to cut rates'
After the Bank of England’s decision to hold interest rates at 5.25 per cent, Julian Jessop of the Institute of Economic Affairs, said:
The Bank of England’s decision to keep its key interest rate on hold was less of a surprise after yesterday’s better inflation data, but still a welcome one.
This was a close call, reflected both in the tight 5-4 vote and in the accompanying statement. The door has been left open for further hikes ‘if there were evidence of more persistent inflationary pressures’.
The deceleration in money and credit growth and other signs of weakening demand probably mean that interest rates are now on hold, but this cannot be taken for granted. With inflation still well above target and after such a long period when monetary policy has been far too loose, the Bank is unlikely to be in any hurry to cut interest rates again either.
What’s more, monetary policy is not just about official interest rates. The Bank will continue its policy of ‘quantitative tightening’ (QT), reducing its holdings of government bonds by another £100bn over the next 12 months. This will maintain some of the upward pressure on long-term borrowing costs.
Overall, though, the Bank has got this one about right. Arguably it should have paused several months ago to assess the impact of the tight squeeze that it is already in place. But it does look like interest rates have now peaked at a much lower level than many had feared.
01:39 PM BST
Households still face £220 increase in mortgages, warns Reeves
Shadow chancellor Rachel Reeves said inflation still remains high and households coming off fixed-rate mortgages will still be worse off because of the Conservatives’ “disastrous” mini-Budget. She said:
Britain has been left worse off after 13 years of economic chaos and instability under the Conservatives.
Households coming off fixed-rate mortgages will be paying an average of £220 more a month and inflation remains high because of the Conservatives’ disastrous mini-budget.
Labour’s plan for the economy is about returning stability and boosting growth so we can cut household bills, create better-paid jobs and make working people in all parts of the country better-off.
01:37 PM BST
Bank of England must be 'vigilant' on wages and inflation, says CBI
After rates were kept on hold, CBI deputy chief economist Anna Leach said:
The coming months will be tricky for the Bank.
They’ll be vigilant regarding developments in wages and inflation expectations, given private-sector wage growth is still topping 8pc.
Meanwhile, the outlook for energy prices has shifted, with oil prices now pushing up and European gas prices once again at the mercy of the winter weather outlook.
This could slow the pace of decline in the headline inflation rate and risks underpinning still-high core inflation.
But the economy is showing signs of turning too: the unemployment rate has risen, vacancies are down and activity is slowing.
12:58 PM BST
Banks cut mortgage costs as Bank of England holds rate at 5.25pc
Major lenders have slashed mortgage costs as the Bank of England voted to hold interest rates at 5.25pc.
Our senior personal finance reporter Lauren Almeida has the latest:
NatWest has cut its two-year fixed rate mortgage from 6.12pc to 5.93pc for borrowers with a loan to value ratio of 60pc. Five-year deals have dropped from 5.35pc to 5.24pc, the bank said.
Rival TSB announced that it would cut some of its two-year fixed deals by up to 0.25 percentage points, and its five-year fixed deals by up to 0.2 percentage points, starting from Friday.
The news comes as policymakers on Threadneedle Street voted to hold the Bank Rate at 5.25pc, bringing an end to the longest period of rate rising in decades.
12:52 PM BST
Money markets give 70pc chance of final rate rise
Money markets are still just about pricing in one more interest rate rise before the end of the year.
However, economists are not so sure, despite the Bank of England’s messaging that more increases are possible:
After the MPC's decision, markets see c.70% chance of one final 25bp hike. Without doubt, the near-term risks are still to the upside, but it's unlikely that CPI, GDP and lab mkt data will be pressuring the MPC to hike more in November than today. 5.25% looks like the peak to me pic.twitter.com/QSkyle8I43
— Samuel Tombs (@samueltombs) September 21, 2023
12:46 PM BST
'This is quite simply fantastic news'
The property market has reacted with relief after the Bank of England held interest rates at 5.25pc.
Housebuilders across the FTSE 350 jumped more than 4pc when the decision was announced.
Riz Malik, director of mortgage broker R3 Mortgages, said: “This is quite simply fantastic news. The Bank of England eventually got the memo that their consecutive rate hikes risk sending the UK into an economic ice age.”
Andrew Montlake, managing director of mortgage broker Coreco, added: “Common sense has finally prevailed and this pause for breath to buy time to analyse further data will be welcomed by many.”
Nick Leeming, chairman of estate agent Jackson-Stops, said: “This might be the dawn of a new era, ushering a hopeful period of stability for mortgage holders.”
12:32 PM BST
Interest rates will not rise further, say economists
Interest rates will not rise further, economists have predicted, after the Bank of England decided to hold borrowing costs at 5.25pc.
The Monetary Policy Committee (MPC) was split 5-4 as it voted to keep rates on hold after a surprise fall in inflation figures on Wednesday.
The decision ends a cycle of 14 consecutive interest rate rises and sent the pound down 0.7pc against the dollar to its lowest level since March.
Paul Dales, chief UK economist at Capital Economics, said the decision indicates that the Bank of England has finished raising rates.
He said: “The surprise decision by the Bank of England to leave interest rates unchanged at 5.25pc today probably means that rates are already at their peak.
“We think rates will stay at this peak of 5.25pc for longer than the Fed, the ECB and investors expect, but that when rates are cut in late 2024 they will be reduced further and faster than widely expected.”
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “It’s unlikely that CPI, GDP and labour market data will be pressuring the MPC to hike more in November than today. 5.25pc looks like the peak to me.”
12:23 PM BST
Inflation 'expected to fall significantly further', says Bank of England
Policymakers said core inflation was “much weaker than expected” as it fell from 6.4pc in June to 5.2pc in August as they explained the decision to hold interest rates steady.
The Monetary Policy Committee said that CPI inflation “is expected to fall significantly further in the near term, reflecting lower annual energy inflation, despite the renewed upward pressure from oil prices, and further declines in food and core goods price inflation”.
Its statement added:
There are increasing signs of some impact of tighter monetary policy on the labour market and on momentum in the real economy more generally.
Given the significant increase in Bank Rate since the start of this tightening cycle, the current monetary policy stance is restrictive. At this meeting, the committee voted to maintain Bank Rate at 5.25pc.
12:18 PM BST
Economy expected to grow 'only slightly,' say policymakers
The Monetary Policy Committee pointed to a weakening in the UK economy in July as it justified its decision to hold interest rates at 5.25pc.
Its statement said:
UK GDP is estimated to have declined by 0.5pc in July and the S&P Global/CIPS composite output PMI fell in August, although other business survey indicators remain consistent with positive GDP growth.
While some of this news could prove erratic, Bank staff now expect GDP to rise only slightly in 2023 Q3.
Underlying growth in the second half of 2023 is also likely to be weaker than expected.
12:09 PM BST
Hunt: Tide is turning on inflation
After interest rates were held at 5.25pc, Chancellor Jeremy Hunt said:
We are starting to see the tide turn against high inflation, but we will continue to do what we can to help households struggling with mortgage payments.
Now is the time to see the job through. We are on track to halve inflation this year and sticking to our plan is the only way to bring interest and mortgage rates down.
12:08 PM BST
Pound declines sharply as interest rates held at 5.25pc
The pound has dropped by 0.7pc on the day following the decision to its lowest level since March.
Sterling is worth less than $1.23 and has fallen 0.5pc against the euro, which is nearing 87p.
12:05 PM BST
Bank of England insists further rate rises may be required
In its notes explaining its decision to hold interest rates at 5.25pc, the Bank of England said that its monetary policy must be restrictive for a “sufficiently long” period.
Monetary policy will need to be sufficiently restrictive for sufficiently long to return inflation to the 2pc target sustainably in the medium term, in line with the Committee’s remit.
Further tightening in monetary policy would be required if there were evidence of more persistent inflationary pressures.
12:03 PM BST
Policymakers split on holding rates steady
The Bank of England’s Monetary Policy Committee voted in favour of a hold in interest rates by the tightest of margins.
The committee was truly split, voting in favour of a hold by 5-4.
12:01 PM BST
Bank of England holds interest rates at 5.25pc
The Bank of England has held interest rates at 5.25pc following the surprise dip in inflation.
11:58 AM BST
Not long now...
We’re minutes away from the Bank of England’s next decision on interest rates.
Suren Thiru, economics director for chartered accountant group ICAEW, said raising interest rates would be a “misstep” following the surprise fall in inflation.
He said: “Although interest rates will probably rise on Thursday, additional tightening unnecessarily risks aggravating the financial struggles facing households and businesses, given the longtime lag between rate hikes and their impact on the real economy.”
Let us wait and see what the Monetary Policy Committee decides.
11:40 AM BST
Wall Street braces for slump when markets open
As the Bank of England prepares to make its big rates announcement, US stocks are already declining in premarket trading after the Federal Reserve held interest rates steady while hinting at another hike this year.
Rate-sensitive stocks including Apple, Meta, Alphabet, and Nvidia have fallen between 0.5pc and 1.5pc as the two-year and 10-year Treasury yields surged.
The US central bank delivered a widely anticipated pause on Wednesday and revised economic projections higher with warnings that the battle against inflation was far from over, prompting a weak session for Wall Street on Wednesday.
The Fed’s updated quarterly projections showed there are chances that rates could be lifted one more time in 2023 to a peak range of 5.5pc-5.75pc - with significantly tighter rates throughout 2024 than previously expected.
In premarket trading, the Dow Jones Industrial Average has fallen 0.5pc, the S&P 500 has dropped 0.6pc and the Nasdaq 100 is down 0.8pc.
11:20 AM BST
Halving inflation is number one priority, says PM
The Prime Minister said he is focused on bringing inflation down as quickly as possible when asked about high interest rates.
Asked when people would start to feel better off, Rishi Sunak told broadcasters:
I know things are tough right now for families and businesses with the cost of living, and that is why my number one priority coming into this year was to halve inflation.
We had very welcome news yesterday which people might not have seen, but inflation yesterday fell faster than many people were expecting.
That shows that our plan is working. We have got to stick to the plan to bring inflation down.
That is what my number one economic priority is and that is what we are delivering, and in the meantime we have got support in place to help families that are struggling, whether it is those on welfare or those with mortgages.
The most important thing I can do to help people is to bring inflation down as quickly as possible. Yesterday’s figures show that the plan is working.
11:05 AM BST
Bank of England faces protests over interest rate rises
Protesters have gathered outside the Bank of England to voice their anger about interest rate increases.
The Equality Trust said the 14 consecutive increases in borrowing costs imposed by the Bank have so far failed to quell inflation.
Instead, rate rises are eroding household incomes, pushing up mortgage repayment rates and inflating bank profits, the group said.
It is calling on policymakers to halt rate rises and for the Government to impose a windfall tax on the profits made by the big four banks.
10:49 AM BST
Oil falls from 10-month highs
Oil prices have eased after their recent rally, complicating the picture for the Bank of England ahead of its interest rate decision today.
Brent crude, the international benchmark, has fallen 1pc today to below $93 a barrel and is down 3pc from 10-month highs over $95 on Tuesday.
Prices have risen by more than 28pc since mid-June after supply cuts from Saudi Arabia and Russia.
The drop off in the last two days comes as policymakers at the Bank of England decide whether to raise interest rates again to battle inflation, which fell to 6.7pc in August but remains more than three times its 2pc target.
US-produced West Texas Intermediate has fallen 1pc below $89 a barrel.
10:35 AM BST
DFS shares gain as bosses 'confident market will recover'
Higher mortgage costs are hitting sofa sales, DFS has warned as profits fall by almost 50pc.
The living room furniture retailer’s pre-tax profits dropped by 49.2pc to £29.7m during the year to June 25, while revenue tumbled by 5.3pc to £1.09bn.
The sofa and soft furnishings specialist blamed this performance on higher interest rates and rising living costs, which have weighed down on shoppers’ disposable income.
The London-listed company estimated that economic uncertainty has resulted in upholstery orders sinking more than 15pc below pre-pandemic levels.
DFS told shareholders on Thursday, “With the cost of living crisis lingering on and consumers now also being impacted by higher property costs, we anticipate that market demand will drop further in FY24 before we start to see a recovery to pre-pandemic levels.”
The Doncaster-based retailer passed on higher delivery and raw material costs to consumers by raising retail prices earlier this year.
Despite these challenges, DFS said it increased its share of the UK upholstery market to 38pc, an increase of two percentage points.
DFS predicted it will generate a “low single digit” increase in pre-tax profit - between £30m and £35m - during the 2024 financial year as inflationary pressures ease and cost-cutting measures pay off.
Tim Stacey, chief executive, said: “The group is operating in one of the toughest economic climates we have experienced. Whilst we are confident the upholstery market will recover, forecasting the specific timing and pace of the recovery is challenging.”
The sofa seller’s share price closed 5.1pc higher following the results.
10:17 AM BST
Ryanair cuts Dublin schedule over passenger charges
Ryanair has announced it is cutting its winter 2023/2024 schedule at Dublin Airport in response to increased passenger charges.
The airline cancelled 17 routes and moved 19 aircraft to alternative EU airports which it says incentivise airlines with quieter, lower emission aircraft.
In a statement, Ryanair said it made the decision due to Dublin Airport operator DAA’s “rising passenger charges of 45pc, ongoing Capex mismanagement and their failure to deliver a meaningful environmental incentive scheme that rewards lower emission aircraft”.
It said: “DAA has a history of mismanagement at Dublin Airport, including understaffing summer security, wasting taxpayers’ money on ill-thought-out infrastructure projects and failing to support low-cost access and sustainable growth”.
It comes after a ruling by the competition watchdog earlier this month which paved the way for Heathrow to be allowed to charge higher fees.
10:00 AM BST
Interest rate decision a 'close call'
Analysts are divided on what decision the Bank of England’s Monetary Policy Committee will make on interest rates.
James Smith, a developed markets economist at Dutch bank ING, called the decision a “close call”.
Debapratim De, senior economist at Deloitte, said Wednesday’s inflation figures “will give it some additional room for manoeuvre, should it choose to pause tightening instead”.
Victoria Scholar, head of investment at Interactive Investor said it was “one of the most uncertain decisions in a while,” warning that “overtightening has the potential to push the UK into a recession, which supports the case for a hold today”.
Saxo market strategist Charu Chanana said the fall in inflation in August “signals that the vote spilt at the meeting today could tilt more dovish, with possibility of sustained services disinflation more likely now”.
He added: “Even if the BOE was to raise rates one more time today, any hawkish interpretations from the meeting remain unlikely.”
09:38 AM BST
Gas prices slump as Australian workers near deal over strikes
European gas prices have fallen as workers at key Australian plants near a deal with bosses over pay.
Dutch front-month futures, the continent’s benchmark, have slumped as much as 6.1pc as Chevron edges closer to a deal with unions that would end strikes at two of its plants which supplied more than 5pc of the world’s liquified natural gas last year.
It comes as flows from Norway pick up after the completion of maintenance at the giant Troll field in the North Sea.
Prices were last down 2.1pc to around 36.50 per megawatt hour.
09:20 AM BST
Norway increases interest rates amid 'persistently high inflation'
Norway’s central bank has raised its interest rates for the 13th time in two years, and warned that one more hike is “likely” in December as inflation remains too high.
The bank has raised its policy rate by a quarter point to 4.25pc after the country’s annual inflation rate eased to 6.3pc in August, down from a June peak of 7pc.
A statement said: “Persistently high inflation imposes substantial costs on society.”
— TRADING ECONOMICS (@tEconomics) September 21, 2023
09:04 AM BST
Pound hits lowest level since March
The pound touched its lowest level in six month as Britain waits to find out what the Bank of England will decide about interest rates.
The Monetary Policy Committee had been widely expected to hike rates again, from 5.25pc to 5.5pc, which would be the highest base rate since February 2008.
However, Wednesday’s data showing a fall in inflation in August prompted traders to slash bets on a rate rise, which money markets now price at 50-50.
Any increase would be the 15th in a row. The Bank of England started upping rates from 0.1pc in December 2021 and has not missed a single opportunity to do so since then.
Sterling has dropped 0.3pc today to hover above $1.23, hitting its lowest level since March.
08:57 AM BST
Switzerland leaves interest rates on hold
The Swiss National Bank (SNB) has left interest rates unchanged at 1.75pc, saying past hikes were countering inflation while warning that more increases may still be needed.
Switzerland’s central bank cautioned that “it cannot be ruled out that a further tightening of monetary policy may become necessary to ensure price stability over the medium term”.
The decision by the SNB, which unveils announcements only once a quarter, widens the gap in rates with its peers.
Borrowing costs in Switzerland have increased by 250 basis points since last year, compared to 500 basis points in Britain and 450 in the eurozone.
— TRADING ECONOMICS (@tEconomics) September 21, 2023
08:38 AM BST
FTSE 100 falls after Fed's signal on interest rates
UK stocks opened lower ahead of the Bank of England’s interest rate decision today.
The blue-chip FTSE 100 and midcap FTSE 250 were both down 0.4pc after the Federal Reserve signalled interest rates in the US could stay higher for longer.
The Fed held its interest rates steady on Wednesday, but stiffened its stance on the potential for further increases. Asian stocks tracked the lacklustre mood on Wall Street on Wednesday after the Fed revised its economic projections.
The Bank of England will announce at noon whether it is halting a run of interest rate hikes that stretches back to December 2021.
Further pulling down the FTSE 100 was a 1.4pc slump in industrial miners as dollar-priced metals declined as the greenback strengthened.
Shares of trading platform IG Group and homebuilders Crest Nicholson and Redrow were down between 3pc and 5pc as they traded ex-dividend.
Next rose 1.6pc after the clothing retailer raised its full-year profit outlook for the third time in four months.
JD Sports Fashion climbed nearly 6pc to the top of FTSE 100 after the sportswear retailer forecast a higher annual profit.
08:20 AM BST
JD Sports boosts sales thanks to 'resilient' customers
JD Sports Fashion shares have risen 6.1pc as it followed Next in defying gloom about the retail sector.
The clothing retailer revealed revenues jumped 8.3pc to £4.8bn in the six months to July 29, with pre-tax profits up a quarter to £375.2m.
Chief executive Régis Schultz said the company remained on track to deliver profits of just over £1bn for the year after growing organic sales by 12pc, including rises of 27pc in Europe and 15pc in North America.
The company’s shares had been hit after US rival Foot Locker issued a profit warning last month.
Mr Schultz said:
Looking ahead, our core consumers remain resilient in the face of the ongoing global macro-economic challenges.
The JD brand continues to strengthen its global presence, supported by our strategic partnerships with much-loved brands and our strong balance sheet.
08:05 AM BST
Markets fall ahead of interest rate decision
The FTSE 100 has dropped ahead of the Bank of England’s crunch meeting on whether to raise interest rates to their highest level since February 2008.
The UK’s blue chip index has fallen 0.5pc to 7,692.33 after the open, while the midcap FTSE 250 has dropped 0.4pc to 18,635.90.
07:54 AM BST
Toshiba to end 74 years as a listed company
Japan’s troubled electronics and energy giant Toshiba is to be taken private in a deal that will end its 74-year-long run as a listed company.
A 2trn yen (£11bn) tender offer by a Japanese consortium has been completed after the number of shares purchased exceeded the minimum 78.65pc threshold needed to delist the business.
The switch to Toshiba’s new parent company and largest shareholder, called TBJH, will take place on September 27, although the move still needs shareholders’ approval, with a meeting set for November.
Toshiba will then delist from the Tokyo Stock Exchange within about a month. That will end its more than seven-decade history as a listed company. The purchase price was at 4,620 yen (£25).
Chief executive Taro Shimada said: “Toshiba Group will now take a major step toward a new future with a new shareholder.”
The delisting follows a sprawling accounting scandal, which surfaced in 2015 and involved books being doctored for years.
It added to woes related to Toshiba’s nuclear energy business. It faces the daunting and costly task of decommissioning the nuclear power plant in Fukushima, northern Japan, where a tsunami set off three meltdowns in 2011.
07:47 AM BST
Chancellor will be able to make tax cuts next year, economists predict
Jeremy Hunt will likely find some “wiggle room” for tax cuts next year, economists have said, although doing so may force the Bank of England to keep interest rates higher for longer.
The Chancellor has ruled out tax cuts for his Autumn Statement on November 22, warning that a “borrowing binge” was not a good move despite a surprise fall in inflation on Wednesday.
Ashley Webb, UK economist at Capital Economics, said “he will probably have some wiggle room for tax cuts and/or spending rises in the Budget in March 2024”. He said:
Together with a £1.5bn upward revision to borrowing in previous months, after five months of the 2023/24 fiscal year borrowing is £11.4bn lower than the OBR expected at this stage.
Admittedly, if we are right in expecting the economy to weaken later this year, tax receipts will probably soon disappoint.
While the OBR’s forecasts are based on real GDP growth of 0.2pc and 2.1pc in 2023/24 and 2024/25 respectively, we expect growth of just 0.1pc and 0.8pc.
Overall, though, we would be surprised if the Chancellor doesn’t find some wiggle room for tax cuts and/or spending rises in the Budget in March 2024.
He added: “That would give the Bank of England another reason to keep interest rates at their peak for longer than the Fed and the ECB.”
07:34 AM BST
Next ups profit outlook as weather delivers boost
Fashion retailer Next has upgraded its profit expectations for the third time this year after seeing better-than-expected sales boosted by warm weather and rising wages.
The high-street chain said its pre-tax profit improved by 4.8pc to £420m over the six months to July, compared to the same period last year.
It saw total sales rise by 5.4pc with exceptionally warm weather in late May and June likely to have boosted sales of its summer clothing at a critical time, the group said.
Next lifted its profit guidance for the full year from £845m to £875m and forecast an easing of inflationary pressures over the next financial year.
Next chief executive Lord Wolfson said that along with the weather, it was able to boost its outlook as it had been too cautious about the sales outlook.
07:25 AM BST
Borrowing below OBR forecasts but Chancellor insists on sticking to the plan
Government borrowing has come in below the Office for Budget Responsibility’s (OBR’s) official forecasts for the first five months of the fiscal year as the public purse was boosted by higher than expected tax receipts.
The budget deficit between April and August was £69.6bn, according to the Office for National Statistics, which was £11.4bn less than the OBR forecast in March.
It comes as self assessment tax receipts for July and August combined to £13.3bn, which was £1.7bn more than in the same two months last year. It was also £0.9bn more than the £12.4bn forecast by the OBR.
In theory this should give the Chancellor more room for tax cuts but this looks unlikely after his insistence on balancing the books and the fact the August borrowing figure was the fourth highest for the month on record.
07:16 AM BST
Hunt: We need to balance the books
As public borrowing came in above economists’ forecasts, Chancellor Jeremy Hunt said:
These numbers show why after helping families in the pandemic we now need to balance the books.
That becomes much easier when inflation is under control because higher inflation pushes up interest rates, so we need to stick to the plan to get it down.
07:12 AM BST
Government borrowing rises in blow to tax cut hopes
Government borrowing increased last month dampening any hopes that the Chancellor will have room for tax cuts in his Autumn Statement.
The Treasury borrowed £11.6bn in August, which was £3.5bn more than the same month last year and the fourth highest August borrowing figure since monthly records began in 1993, according to the Office for National Statistics (ONS).
The figure was £1.4bn below the forecast made by the Office for Budget Responsibility but was higher than borrowing of £11.1bn predicted by most economists.
It comes after a surprise fall in inflation on Wednesday which led markets to dramatically cut bets on the Bank of England raising interest rates today, easing pressure on households.
However, Jeremy Hunt insisted it will not mean a pre-election “borrowing binge”.
Total debt reached £2.59trn, which is 98.8pc of GDP.
Britain’s debt ratio to GDP is 2.3 percentage points higher than a year ago and at levels last seen in the early 1960s.
Public sector net borrowing (excluding public sector banks) was £11.6 billion in August 2023, up £3.5 billion on August 2022.
It was the fourth-highest August borrowing since monthly records began in 1993.
➡️ https://t.co/sLq2s6DDDD pic.twitter.com/qH11blvElM
— Office for National Statistics (ONS) (@ONS) September 21, 2023
07:08 AM BST
Thanks for joining us on a huge day as the Bank of England prepares to announce its next decision on interest rates.
This morning, the latest data from the Office for National Statistics showed that public sector borrowing increased in August compared to the same time a year earlier.
The Treasury borrowed £11.6bn last month, which was the fourth highest August borrowing figure since monthly records began in 1993.
5 things to start your day
1) Why delaying the petrol ban risks denting confidence in Britain’s car industry | Carmakers fear rolling back net zero targets will scare off much-needed investment
2) Inside Sunak’s plan to free Britain’s electricity grid from a tangle of red tape | Many renewable energy projects vital for net zero are held up by bureaucracy and delays
3) Brussels to crack down on greenwashing with ban on ‘carbon neutral’ labels | New regulations will make the EU’s stance the world’s strictest
4) Fed leaves rates unchanged but hints at future hike | US central bank holds interest rates steady at 5.25pc to 5.50pc
5) Bets on interest rate rise slashed after surprise inflation fall | Bank of England expected to hold rates at 5.25pc after consumer prices defy expectations
What happened overnight
Asian stocks dipped across the board as investors interpreted the US Federal Reserve’s latest policy statements as signalling higher-for-longer interest rates.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.4pc by early afternoon Hong Kong time. Japan’s Nikkei slid 0.6pc. China’s blue-chip dipped 0.6pc, while Hong Kong’s benchmark shed 1.3pc.
Wall Street stocks slumped on Wednesday after the Federal Reserve held its main interest rate steady at its highest level in more than two decades as expected.
The S&P 500 fell 41.75 or 0.9pc to 4,402.20. The Dow Jones Industrial Average lost 76.85 or 0.2pc to 34,440.88, and the Nasdaq composite dropped 209.06 or 1.5pc to 13,469.13.
The yield on the 10-year Treasury rose to 4.39pc from less than 4.32pc shortly before the Fed’s announcement and from 4.37pc late Tuesday. It’s back to where it was in 2007.