The Bank of England left interest rates unchanged at 5.25 per cent, bringing to an end a cycle of 14 straight increases in the cost of borrowing.
The Monetary Policy Committee had been widely expected to raise rates for the 15th successive time but market sentiment shifted when data showed a surprise fall in the rate of inflation on Wednesday.
In the event the MPC voted five to four in favour of putting interest rates on hold. Four members of the MPC voted to raise rates to 5.5 per cent.
It is the first time the Bank of England has taken a break from increasing rates since November 2021.
The Consumer Price Index fell to 6.7 per cent in August, following a reading of 6.8 per cent in July, and is now at its lowest point since February last year.
"Inflation has fallen a lot in recent months and we think it will continue to do so. That's welcome news," Bank of England governor Andrew Bailey said. "But there is no room for complacency. We need to be sure inflation returns to normal and we will continue to take the decisions necessary to do just that."
In a letter to the UK government he listed some of the factors that guided the policymakers decision. Food price inflation appears to have peaked, core consumer goods increases started to fall back and external cost pressures have eased.
There are however dangers to consider as well. According to Mr Bailey services inflation is projected to remain elevated, weekly earnings growth is running at an above inflation 8.1 per cent and oil prices are on an upwards trajectory.
He said that monetary policy will need to be sufficiently restrictive to hit the 2 per cent headline inflation target while noting the potential threat from "second-round effects of external cost shocks on inflation in wages and domestic prices".
"Borrowers and mortgage holders will breathe a sigh of relief, but the Bank of England still has some difficult decisions ahead," Russ Mould, investment director at AJ Bell, told The National.
"The economy isn’t really growing and purchasing managers' indices may warn of a slowdown ahead, while increases in the oil price, rising rents and a fresh slide in sterling (which increases the cost of imports) could all fuel inflation if they are sustained."
Split decision
The Bank of England now predicts that the UK economy will grow by only 0.1 per cent in the third quarter of this year, compared with a forecast of 0.4 per cent growth at its last meeting.
It also expects inflation to return to its target of 2 per cent by the second quarter of 2025.
“The split decision from the Monetary Policy Committee – with five in favour of a rate pause and four favouring a quarter-point hike – proves how tricky the decision was for the Bank of England, following the better-than-expected inflation data on Wednesday," said Alice Haine, personal finance analyst at Bestinvest.
The MPC's decision comes a day after the US Federal Reserve held interest rates steady, but noted that another rise is likely this year and that there would be fewer cuts than previously expected in 2024.
Sweden's Riksbank and Norway's Norges Bank each raised their key interest rates by 0.25 percentage points on Thursday, but the Swiss National Bank unexpectedly left its rate unchanged.
"In many ways, the Bank of England has delivered the same story as the Federal Reserve yesterday, and puts both central banks at odds with what is happening in Europe, where the European Central Bank and a number of European central banks have continued to raise interest rates further this month," Stuart Cole, chief macro economist at Equiti Capital told The National.
UK inflation peaked at 11.1 per cent in October last year, and the government has repeatedly pledged to reduce it to about 5 per cent by the end of the year.
Prime Minister Rishi Sunak said that the plan to bring inflation down was working.
"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," he said.
"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."
For Janet Mui, wealth manager at RBC Brewin Dolphin, pausing the upwards march of interest rates shows that the Bank of England is a little concerned that the effect of the 14 previous increases is now starting to bite into the economy, "particularly as an increasing number of households refinance into significantly higher rates".
"The other factor is that the latest data from the UK jobs market has weakened and the trend is expected to continue into 2024," she added.
Meanwhile, the pound fell about 0.9 per cent against the dollar to $1.2239 in the wake of the decision, its lowest level in six months.
The markets were evenly split on the chances of an interest rate rise this month, and are now 80 per cent convinced that there is one more increase left in this cycle.
"The Bank of England thinks they have done enough," said Mark Nash, head of fixed income alternatives at Jupiter Asset Management. "But they are taking a risk with inflation as the pound is falling."
The specs
Engine: 3.8-litre twin-turbo flat-six
Power: 650hp at 6,750rpm
Torque: 800Nm from 2,500-4,000rpm
Transmission: 8-speed dual-clutch auto
Fuel consumption: 11.12L/100km
Price: From Dh796,600
On sale: now
Trolls World Tour
Directed by: Walt Dohrn, David Smith
Starring: Anna Kendrick, Justin Timberlake
Rating: 4 stars
Result
UAE (S. Tagliabue 90 1') 1-2 Uzbekistan (Shokhruz Norkhonov 48', 86')
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
'Doctor Strange in the Multiverse Of Madness'
Director: Sam Raimi
Cast: Benedict Cumberbatch, Elizabeth Olsen, Chiwetel Ejiofor, Benedict Wong, Xochitl Gomez, Michael Stuhlbarg and Rachel McAdams
Rating: 3/5
Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
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RESULT
Manchester City 1 Sheffield United 0
Man City: Jesus (9')
Company%20Profile
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Tips on buying property during a pandemic
Islay Robinson, group chief executive of mortgage broker Enness Global, offers his advice on buying property in today's market.
While many have been quick to call a market collapse, this simply isn’t what we’re seeing on the ground. Many pockets of the global property market, including London and the UAE, continue to be compelling locations to invest in real estate.
While an air of uncertainty remains, the outlook is far better than anyone could have predicted. However, it is still important to consider the wider threat posed by Covid-19 when buying bricks and mortar.
Anything with outside space, gardens and private entrances is a must and these property features will see your investment keep its value should the pandemic drag on. In contrast, flats and particularly high-rise developments are falling in popularity and investors should avoid them at all costs.
Attractive investment property can be hard to find amid strong demand and heightened buyer activity. When you do find one, be prepared to move hard and fast to secure it. If you have your finances in order, this shouldn’t be an issue.
Lenders continue to lend and rates remain at an all-time low, so utilise this. There is no point in tying up cash when you can keep this liquidity to maximise other opportunities.
Keep your head and, as always when investing, take the long-term view. External factors such as coronavirus or Brexit will present challenges in the short-term, but the long-term outlook remains strong.
Finally, keep an eye on your currency. Whenever currency fluctuations favour foreign buyers, you can bet that demand will increase, as they act to secure what is essentially a discounted property.
THE CARD
2pm: Maiden Dh 60,000 (Dirt) 1,400m
2.30pm: Handicap Dh 76,000 (D) 1,400m
3pm: Handicap Dh 64,000 (D) 1,200m
3.30pm: Shadwell Farm Conditions Dh 100,000 (D) 1,000m
4pm: Maiden Dh 60,000 (D) 1,000m
4.30pm: Handicap 64,000 (D) 1,950m
THE BIO
Born: Mukalla, Yemen, 1979
Education: UAE University, Al Ain
Family: Married with two daughters: Asayel, 7, and Sara, 6
Favourite piece of music: Horse Dance by Naseer Shamma
Favourite book: Science and geology
Favourite place to travel to: Washington DC
Best advice you’ve ever been given: If you have a dream, you have to believe it, then you will see it.
How to watch Ireland v Pakistan in UAE
When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.
Other acts on the Jazz Garden bill
Sharrie Williams
The American singer is hugely respected in blues circles due to her passionate vocals and songwriting. Born and raised in Michigan, Williams began recording and touring as a teenage gospel singer. Her career took off with the blues band The Wiseguys. Such was the acclaim of their live shows that they toured throughout Europe and in Africa. As a solo artist, Williams has also collaborated with the likes of the late Dizzy Gillespie, Van Morrison and Mavis Staples.
Lin Rountree
An accomplished smooth jazz artist who blends his chilled approach with R‘n’B. Trained at the Duke Ellington School of the Arts in Washington, DC, Rountree formed his own band in 2004. He has also recorded with the likes of Kem, Dwele and Conya Doss. He comes to Dubai on the back of his new single Pass The Groove, from his forthcoming 2018 album Stronger Still, which may follow his five previous solo albums in cracking the top 10 of the US jazz charts.
Anita Williams
Dubai-based singer Anita Williams will open the night with a set of covers and swing, jazz and blues standards that made her an in-demand singer across the emirate. The Irish singer has been performing in Dubai since 2008 at venues such as MusicHall and Voda Bar. Her Jazz Garden appearance is career highlight as she will use the event to perform the original song Big Blue Eyes, the single from her debut solo album, due for release soon.
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
How to play the stock market recovery in 2021?
If you are looking to build your long-term wealth in 2021 and beyond, the stock market is still the best place to do it as equities powered on despite the pandemic.
Investing in individual stocks is not for everyone and most private investors should stick to mutual funds and ETFs, but there are some thrilling opportunities for those who understand the risks.
Peter Garnry, head of equity strategy at Saxo Bank, says the 20 best-performing US and European stocks have delivered an average return year-to-date of 148 per cent, measured in local currency terms.
Online marketplace Etsy was the best performer with a return of 330.6 per cent, followed by communications software company Sinch (315.4 per cent), online supermarket HelloFresh (232.8 per cent) and fuel cells specialist NEL (191.7 per cent).
Mr Garnry says digital companies benefited from the lockdown, while green energy firms flew as efforts to combat climate change were ramped up, helped in part by the European Union’s green deal.
Electric car company Tesla would be on the list if it had been part of the S&P 500 Index, but it only joined on December 21. “Tesla has become one of the most valuable companies in the world this year as demand for electric vehicles has grown dramatically,” Mr Garnry says.
By contrast, the 20 worst-performing European stocks fell 54 per cent on average, with European banks hit by the economic fallout from the pandemic, while cruise liners and airline stocks suffered due to travel restrictions.
As demand for energy fell, the oil and gas industry had a tough year, too.
Mr Garnry says the biggest story this year was the “absolute crunch” in so-called value stocks, companies that trade at low valuations compared to their earnings and growth potential.
He says they are “heavily tilted towards financials, miners, energy, utilities and industrials, which have all been hit hard by the Covid-19 pandemic”. “The last year saw these cheap stocks become cheaper and expensive stocks have become more expensive.”
This has triggered excited talk about the “great value rotation” but Mr Garnry remains sceptical. “We need to see a breakout of interest rates combined with higher inflation before we join the crowd.”
Always remember that past performance is not a guarantee of future returns. Last year’s winners often turn out to be this year’s losers, and vice-versa.
How to wear a kandura
Dos
- Wear the right fabric for the right season and occasion
- Always ask for the dress code if you don’t know
- Wear a white kandura, white ghutra / shemagh (headwear) and black shoes for work
- Wear 100 per cent cotton under the kandura as most fabrics are polyester
Don’ts
- Wear hamdania for work, always wear a ghutra and agal
- Buy a kandura only based on how it feels; ask questions about the fabric and understand what you are buying
Key changes
Commission caps
For life insurance products with a savings component, Peter Hodgins of Clyde & Co said different caps apply to the saving and protection elements:
• For the saving component, a cap of 4.5 per cent of the annualised premium per year (which may not exceed 90 per cent of the annualised premium over the policy term).
• On the protection component, there is a cap of 10 per cent of the annualised premium per year (which may not exceed 160 per cent of the annualised premium over the policy term).
• Indemnity commission, the amount of commission that can be advanced to a product salesperson, can be 50 per cent of the annualised premium for the first year or 50 per cent of the total commissions on the policy calculated.
• The remaining commission after deduction of the indemnity commission is paid equally over the premium payment term.
• For pure protection products, which only offer a life insurance component, the maximum commission will be 10 per cent of the annualised premium multiplied by the length of the policy in years.
Disclosure
Customers must now be provided with a full illustration of the product they are buying to ensure they understand the potential returns on savings products as well as the effects of any charges. There is also a “free-look” period of 30 days, where insurers must provide a full refund if the buyer wishes to cancel the policy.
“The illustration should provide for at least two scenarios to illustrate the performance of the product,” said Mr Hodgins. “All illustrations are required to be signed by the customer.”
Another illustration must outline surrender charges to ensure they understand the costs of exiting a fixed-term product early.
Illustrations must also be kept updatedand insurers must provide information on the top five investment funds available annually, including at least five years' performance data.
“This may be segregated based on the risk appetite of the customer (in which case, the top five funds for each segment must be provided),” said Mr Hodgins.
Product providers must also disclose the ratio of protection benefit to savings benefits. If a protection benefit ratio is less than 10 per cent "the product must carry a warning stating that it has limited or no protection benefit" Mr Hodgins added.
Other simple ideas for sushi rice dishes
Cheat’s nigiri
This is easier to make than sushi rolls. With damp hands, form the cooled rice into small tablet shapes. Place slices of fresh, raw salmon, mackerel or trout (or smoked salmon) lightly touched with wasabi, then press, wasabi side-down, onto the rice. Serve with soy sauce and pickled ginger.
Easy omurice
This fusion dish combines Asian fried rice with a western omelette. To make, fry cooked and cooled sushi rice with chopped vegetables such as carrot and onion and lashings of sweet-tangy ketchup, then wrap in a soft egg omelette.
Deconstructed sushi salad platter
This makes a great, fuss-free sharing meal. Arrange sushi rice on a platter or board, then fill the space with all your favourite sushi ingredients (edamame beans, cooked prawns or tuna, tempura veggies, pickled ginger and chilli tofu), with a dressing or dipping sauce on the side.
