Interest rate cuts 'unlikely' from Bank of England as unemployment soars
Experts are sounding the alarm that interest rates might not come down in September
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Interest rate cuts from the Bank of England later this year are in doubt following the publication of the latest unemployment figures.
The Office for National Statistics (ONS) found that unemployment in the UK for the three to July fell to 4.2 per cent.
This is down from 4.4 per cent over the previous quarter with average earnings growth plummeting to 5.4 per cent over the period.
Experts are sounding the alarm that decision-making from the Bank of England could be affected going forward due to these numbers.
The central bank has raised the nation's base rate numerous times over the last two years in its fight against inflation.
Up until last month, the Bank's Monetary Policy Committee (MPC) raised and held interest rates at a 16-year high of 5.25 per cent.
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Last week, the Bank of England voted to cut interest rates GETTY As a consequence of this decision, borrowing costs skyrocketed which detrimentally impacted mortgage holders and people in debt.
With the consumer price index (CPI) easing to the Bank of England's two per cent target, the base rate was slashed to five per cent.
While many believed this signalled a course correction from the MPC, economists are warning future interest rate cuts are not guaranteed.
Joe Nellis, an economic adviser to MHA, cautioned the public about pricing in a potential rate reduction in September.
He explained: "Unemployment has unexpectedly fallen back to 4.2 per cent in July which means another cut in rates is unlikely in the near future.
"As expected, there has been a decline in growth in average earnings, suggesting that the UK labour market is softening.
"The effects of the recent public sector wage deals are unlikely to change this in the medium term.
"Unemployment is now back to levels that we saw at the back end of last year although there remain continued labour shortages across many sectors.
"Despite the fall in unemployment in July, looking ahead, we still predict the medium-term unemployment rate to grow steadily, reaching around 5.3 per cent by mid-2025.
"Similarly, with the prospects of inflation falling below the Bank of England’s 2 per cent target, we expect earnings growth to settle down at around four per cent to 4.25 per cent by next summer."
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Interest rate hikes have pushed up mortgage repayments for many GETTY Analysts will have a better idea about the likelihood of more rate cuts from the Bank of England after this week's inflation figure publication.
The ONS will publish the CPI rate for the 12 months to July 2024 on August 14.
Following this, the Bank of England's MPC will next make an announcement regarding the base rate on September 19.