BETTER RATE THAN NEVER
Boost of lower interest rates could be on the way after Bank of England said it was ‘optimistic’ inflation is falling
Plus Mike Ashley has slammed Newcastle United's latest kit deal
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A SUMMER boost of lower interest rates could be on the way after the Bank of England said it was “optimistic” that inflation is falling.
The Bank yesterday kept rates at 5.25 per cent for the sixth time in a row but suggested a cut could come soon.
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Two out of nine members in the rate-setting committee voted in favour of cutting rates for the first time since the Bank started hikes two years ago.
Even gloomy governor Andrew Bailey said he was “optimistic that things are moving in the right direction” and suggested that rates could be cut by more than money markets are pricing in.
Mortgages and credit card rates are priced on where money markets expect the Bank to be.
Financial markets are betting on a 50 per cent likelihood that the first rate cut comes as early as next month, with a 75 per cent probability in August.
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There is no committee meeting in July.
Mr Bailey yesterday told journalists that a “June rate cut is neither ruled out nor a fait accompli”.
But he stressed the Bank will have two sets of official inflation figures, plus wage data, to consider before its next decision on June 20.
The markets are betting that if figures show the rate of price rises easing from 3.2 per cent to its golden target of two per cent, the Bank will be confident enough to lower rates.
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Falling energy prices since the crisis caused by Russia’s invasion of Ukraine are largely behind the inflation dip.
Simon French, chief economist at Panmure Gordon, said the Bank will keep watch on services inflation, which is still at six per cent as pubs and restaurants hike prices to fund wage rises.
Latest interest rates explained by Business Editor Ashley Armstrong
The Bank has hesitated before cutting rates as wages are still rising by six per cent.
While most would cheer higher pay, the Bank wants the opposite because that would mean its higher interest rates have cooled hot inflation.
Critics argue the Bank risks overdoing it and squeezing the economy too hard by keeping rates high even when there are signs inflation is coming down.
Business investment has shrunk because many companies cannot afford to take on extra debt.
House purchases have also fallen because of high mortgage rates.
At the start of the year, the Bank was expected to cut rates this month, but mortgage bills have crept higher as those hopes have been pushed back.
ITV Maya pickup
LOVE Island broadcaster ITV has blamed the knock-on effect of the Hollywood actors and writers strike for disappointing revenues —– but expects the Euros to contribute to a bounceback this summer.
The company said the walkouts would make an £80million dent in its revenues this year as new commissions have been held up.
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The comments came as ITV admitted revenues had dropped by 16 per cent to £283million in the first quarter, largely dragged down by its production business.
However, advertising revenues rose by three per cent in the same quarter.
ITV expects ad revenues to rise by eight per cent in the first half, with supermarkets and brewers spending more as Maya Jama returns to Love Island and Harry Kane captains England during its coverage of the Euro 2024 football tournament.
Geordie's 'kits hike'
NEWCASTLE’S kit deal with JD Sports is “anti-competitive” and will hike prices, Mike Ashley told the Court of Appeal.
Mr Ashley is seeking a temporary court order to force his old club to supply his Sports Direct with replica kit.
Last month the Competition Appeal Tribunal rejected his bid.
But his lawyer accused the Toon of abusing its position, saying: “A Newcastle fan will not switch to an Arsenal jersey, even if faced with a price hike.”
Takeover song hits last note
THE takeover saga for song rights firm Hipgnosis is finally drawing to a close — after rival Concord Music refused to sweeten its offer.
The US company — which owns song rights to Daft Punk and Mark Ronson — yesterday said that it would bow out of the price war without improving its £1.21billion bid.
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That paves the way for private equity firm Blackstone, an ally of Hipgnosis founder Merck Mercuriadis, to clinch the deal with £1.2billion.
Hipgnosis shares have jumped by 48 per cent since Concord made its first approach in April.
But they fell by 2.53 per cent to 101.96p yesterday, valuing it at £1.23billion.
Hipgnosis spent billions buying the catalogues of some of the top music names including Shakira, Justin Bieber and the Red Hot Chili Peppers.
But the value of its royalty streams fell as interest rates rose, making stable earners such as bonds more attractive.
Cazoo on brink
TROUBLED online used car retailer Cazoo is teetering on the brink of administration, putting 1,000 jobs at risk.
The firm has filed a notice with US regulators and must find a buyer or appoint administrators within ten days.
It marks a steep fall from grace for Cazoo, which was launched by Zoopla founder Alex Chesterman in 2018.
The company had a valuation of £5billion when it listed on the New York Stock Exchange in 2021 but that has tumbled to just £26million.
It has now sold off all its stock.
Mortgage madness
MORTGAGES in arrears rose 3 per cent in the first quarter of 2024 compared to the previous one as interest rates soared.
Some 95,580 homeowners were behind on payments at the end of March — 26 per cent more than a year ago says industry group UK Finance.
Bank £10BN bid
SPANISH banking giant BBVA has launched a hostile £10.5billion takeover bid for TSB owner Sabadell.
BBVA said yesterday it would take the unusual move of presenting its “extraordinarily attractive offer” direct to shareholders, hoping to gain enough support to land the deal.
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Sabadell’s board has rejected the offer.
The bid follows an active spell in banking with the takeover of Virgin Money by Nationwide and a move for Co-op Bank by Coventry Building Society.