‘Super Thursday’ signals no rate rise this year
The Bank of England provided bad news for savers, as the prospect of a rise in interest rates receded into the distance once more.
Yesterday had been dubbed ‘Super Thursday’ by analysts and experts, as it saw not only the interest rate decision, but also the publication of the minutes of the Monetary Policy Committee (MPC) meeting as well as the Bank’s quarterly Inflation Report issued all on the same day.
The signal that interest rates are unlikely to be raised this year was due to the ‘muted’ near-term outlook for inflation, which is expected to remain around zero over the next few months, plus the falls in energy and commodity prices. There is also uncertainty about how the labour market is evolving.
However, the Bank is now forecasting that the UK economy will grow at 2.8% this year, up from the previously predicted 2.5%.
One of the more interesting sideshows of the day was the split in the MPC vote. Many analysts had expected up to three members to vote for a rate increase, but instead of a 6-3 vote it was 8-1, with just Ian McCafferty voting for a rise. The news saw a weakening of sterling and a rise in the FTSE 100.
For savers therefore, and income investors, the wait for a rate rise continues. It means that equity income funds and corporate bond funds remain a focus for many seeking attractive yields along with the potential for capital growth. However, unlike cash, they are not guaranteed and so may fall in value, which means you could get back less than you invest.
For more information or help on income investing, contact Kellands.