Market News

An interest rate cut from the Bank of England in August looks a “near certainty” after new figures showed unemployment rising and pay growth slowing, economists say.

Financial markets had already expected the Bank’s Monetary Policy Committee (MPC) to reduce rates from 4.25 per cent to 4 per cent next month, but the latest figures make this more likely.

The Bank tends to cut rates in response to falling inflation, but although figures released on Wednesday show inflation rising to 3.6 per cent, experts say the poor jobs data will counteract price rises.

This is because high interest rates can weigh down the economy, and exacerbate problems with employment.

The unemployment rate rose to 4.7 per cent, its highest since 2021, although the Office for National Statistics (ONS) has said the figure needs to be treated with caution due to issues with how the data is collected.

Interest rates falling in August will not have a huge impact on most rates for fixed mortgages because lenders have already priced a cut in, but it will mean those on tracker and variable deals see their costs fall.

Asked if an August cut was a “near certainty” after Thursday’s figures on jobs and growth, Michael Saunders, a former MPC member and now adviser at Oxford Economics, said: “Yes, as things stand, but still [more] data to go.