The Bank of England (BoE) is increasingly likely to cut the base rate despite rising inflation, as employment falls in the UK.<\/p>\n
The BoE\u2019s Monetary Policy Committee (MPC) looks set to cut its base rate again when it meets later on today (7th<\/sup> August).\u00a0 Although not guaranteed, the latest employment data will have created rising concerns for MPC members, which includes BoE governor Andrew Bailey.\u00a0 This is despite a surprise increase in inflation in the most recent Office for National Statistics (ONS) data.<\/p>\n Here\u2019s what you need to know and how it could affect your money.<\/p>\n Inflation<\/strong><\/p>\n Inflation rose unexpectedly in June \u2013 increasing from 3.4% to 3.6% on an annual basis, according to the\u00a0ONS\u2019s Consumer Price Index (CPI) measure.<\/p>\n The rise was driven by increased (motor) fuel costs and food price inflation, which has risen for three months in a row now.\u00a0 However, the Bank of England has repeatedly forecast that inflation would be stubbornly high thanks to one-off factors such as an increase in the National Minimum Wage and the Government\u2019s National Insurance hike \u2013 both of which took effect in April 2025.<\/p>\n Employment and wages<\/strong><\/p>\n The ONS\u2019s\u00a0most recent wage and employment data\u00a0showed wage growth slowing and unemployment rising.<\/p>\n The official unemployment rate rose to 4.7% in the three months to May \u2013 its highest level since June 2021, when the UK was still in the midst of the coronavirus pandemic and associated lockdowns.\u00a0 Pay growth slowed from 5.3% to 5%.<\/p>\n While both these figures showed incremental change on the previous data release, they show a pattern of activity in the economy that indicates a slowdown and weakening in the jobs market.<\/p>\n Bank rate<\/strong><\/p>\n There is no guarantee whether the MPC will cut its base rate or not, but the situation in the jobs market is compelling evidence that the economy might need a boost from lowering rates. Investment markets\u00a0have increased predictions\u00a0of a cut today.<\/p>\n At its last meeting the MPC voted to pause rate cuts to wait and see how events would unfold for the economy. However, while inflation remains persistently above the BoE\u2019s 2% target, there is substantial evidence elsewhere that monetary policy might now be too high for comfort.\u00a0 Earlier in the month the ONS reported GDP falling, further evidencing the economy\u2019s struggling situation.<\/p>\n Looking at the bigger picture \u2013 what does this mean for your finances?<\/p>\n It is important to remember the essentials when managing both your long- and short-term finances in such economic conditions.\u00a0\u00a0Your short-term finances should always look to be shielded from unexpected events, with rainy-day funds a critical tool to aid this. This is salient whether you are still working or retired, especially if your portfolio is invested.<\/p>\n It is important to remember though that markets don\u2019t often move in lockstep with economic news and events.\u00a0 Investing is a long-term process that should transcend what is happening at any given moment in the economy and what happens in the news.<\/p>\n","protected":false},"excerpt":{"rendered":" The Bank of England (BoE) is increasingly likely to cut the base rate despite rising inflation, as employment falls in the UK. The BoE\u2019s Monetary Policy Committee (MPC) looks set to cut its base rate again when it meets later on today (7th August).\u00a0 Although not guaranteed, the latest employment data will have created rising concerns for MPC members, which includes BoE governor Andrew Bailey.\u00a0 This is despite a…<\/p>\n