Current Economic News

Question 1

When is the next BofE interest rate decision?

Answer 1

• 8th May 2025

Question 2

Gilt investors brace for £304bn in debt sales

Answer 2

• UK bond sales to rise to £304bn next year, a near record sum
• City investment banks expect £308bn
• Bond trading desks have to monitor price movements and demand
• Some investors forecasting £10bn spending cuts - could lead to currency fluctuations
• Traders may adjust positions e.g. selling bonds if they anticipate further price declines

Question 3

EU calls for households to stockpile 72 hours of food amid war risk

Answer 3

• EU intelligence agencies warn that Russia could attack an EU member state within 3-5 years
• adding natural threats including floods and wildfires worsened by climate change and societal risks such as financial crises

Question 4

Rachel Reeves spring statement

Answer 4

• Economic growth forecasts for 2025 halved from 2 per cent to 1 per cent
• No tax rises nor changes to the fiscal rules as she said they are ‘non-negotiable’
• About 250k people will be pushed into relative poverty
• UK borrowing costs dipped as the government announced debt sales of £304bn for the coming year, slightly less than the £308bn forecast by markets
• Ten year gilt yields down to 4.79% (dropped 0.03%)
• Pound dropped 0.4% to $1.289
• Two year gilt yields dropped to 4.23%, as investors price in a more aggressive pace of interest rate cuts after the inflation reading (inflation at 2.8% down from yearly average of 3.3%)
• Traders are betting on further BoE interest rate cuts
• OBR has downgraded its forecasts for productivity growth from around 2.2% to 1.25%

Question 5

Government debt interest costs hit highest level since 2007

Answer 5

• Have risen to an average of 3.3% amongst the OECD
• Interest payments are swallowing the biggest portion of rich nations’ economic output since 2007 due to defence spending and housing costs
• 4.7% of GDP in the US and 2.9% in the UK
• Sovereign borrowing
• Higher bond yields - this may be done to incentivise the purchase of bonds by investors as during times of political instability such as now (defence spending very high, EU telling consumers to stockpile on necessities) there is a higher credit risk for bonds