(10 minute video)
The Bank of England today chose hold interest rates at 3.75%, reflecting ongoing global uncertainty rather than anything going on in the UK economy.
“What was a surprise to me was that (holding the rate) was a unanimous decision.”
CIO Gary Reynolds
Recent tensions in the Middle East have pushed oil prices higher, and policymakers are being cautious about how this could feed through into inflation. After the sharp rise in inflation a few years ago, Gary reckons the Monetary Policy Committee (MPC) is so nervous about being accused of treating a shock as transitory (which they did in 2022), that “they don’t want to get caught out again when inflation went through 10% very quickly.” The unanimous decision to keep rates the same compared to recent splits in opinion among the committee would suggest it’s a case of doing nothing – for now.
The domestic economic picture suggests an economy that is losing momentum rather than overheating.
“Unemployment… is up to 5.2% now,” Gary notes. “We’ve added an extra 600,000 unemployed people in the economy. That’s not an economy that’s overheating.”
What it means for markets
Markets don’t like uncertainty, and we’ve seen some volatility as investors adjust expectations around interest rates, energy prices and global politics.
Periods like this are not unusual for the Investment Team or investors alike. Geopolitical events, policy decisions and market wobbles are all part of long‑term investing.
Courtiers built its entire approach is built around this reality and maintains it today. Rather than trying to react to events after they’ve happened – which you just can’t do without being too late – its important to focus on diversification, good value assets and long‑term discipline. This helps portfolios absorb short‑term shocks and stay aligned with long‑term goals.
Uncertainty can feel uncomfortable, but it doesn’t mean action is necessary. Interest rates will change again in the future, and markets will continue to move – often unpredictably.
What matters most is remaining focused on your long‑term plan, rather than being distracted by short‑term headlines, and having your investments looked after by someone you can trust.
If you have any questions about what the hold on interest rates means for you, or for anything else, please speak to your adviser or contact us.
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