November 2019 Bank of England base rate

Since 1997, interest rates have been discussed monthly by the Monetary Policy Committee (MPC). This was done to de-politicize the decision, which had previously been done on an ‘as needed’ basis by the incumbent chancellor of the exchequer.

The MPC comprises nine financial experts and is chaired by the governor of the Bank of England, currently Canadian Mark Carney. On the first Thursday of each month, they meet to discuss the UK economy and take into account numerous factors before voting on whether the bank of England base rate (which dictates many types of borrowing but particularly mortgage rates) should go up, go down or remain unchanged. The decision is usually confirmed that or the next day and the minutes of the meeting are released a fortnight or so later.

Many times, over the last decade, all nine have voted for no change as our economy has remained largely benign; occasionally, such as after the EU referendum in 2016, voting for change where a stimulus was needed. In that case, they cut the rate, making borrowing money effectively cheaper, than a year or so prior. The rate was increased by the same small margin (0.25%) in the face of better than expected economic conditions. So, change is unusual and often significant.

In the minutes from the November 2019 meeting, two of the nine members voted to cut rates again, so is this going to spread and what was their thinking? The truth is we don’t know, however it does suggest the economy is slowing down again and they feel a reduction in borrowing costs might get people spending again. With Christmas such an important time for shops and retail generally, it will be very interesting to see whether enough members vote in December for that reduction or whether it was just a one off. We wait with baited breath.

October 2019