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UK Interest Rates Cut a Quarter Percentage By the Bank of England

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UK interest rates
Bank of England lowers its main interest rate by 0.25%, to 5% _ BoE Image

UK interest rates have been cut by The Bank of England for the first time in more than four years, a knife-edge vote that strengthens the Labour government’s commitment to jump-start economic recovery.

The Monetary Policy Committee voted five to four to lower the bank’s main rate by a quarter percentage point to 5%, the Bank of England announced on Thursday.

The decision to cut UK interest rates comes after inflation returned to the bank’s target of 2% in May and remained there in June, despite persistently high services inflation.

Andrew Bailey, governor of the Bank of England, warned that the decision would not pave the way for a quick succession of additional cutbacks.

“Inflationary pressures have eased enough that we’ve been able to lower interest rates today,” said Bailey, one of the officials who voted in favour of the drop.

“But we need to make sure inflation stays low, and be careful not to cut interest rates too quickly or by too much,” he advised.

According to the Financial Times, investors now expect the BoE to cut borrowing prices one or two more times before the end of the year.

UK Interest Rates and the Deficit

Two-year bond rates, which closely reflect investors’ interest rate forecasts, plummeted 0.12 percentage points to 3.69 percent, their lowest level in over a year. Sterling plummeted to a four-week low of $1.2772, down 0.6% against the dollar on the day.

The cut is a gain for chancellor Rachel Reeves as she attempts to revive economic development and address what Labour claims is a £22 billion deficit in the public finances.

Reeves, who wants to avoid giving the impression that the rate decrease will reduce the need for “tough choices” such as tax increases in her October Budget, responded cautiously to the move.

“While today’s interest rate cut will be welcome news, millions of families will still face higher mortgage rates following Liz Truss’s brief premiership in 2022,” she stated.

“That is why this government is taking the difficult decisions now to fix the foundations of our economy after years of low growth, so we can rebuild Britain and make every part of our country better off,” according to her.

Ruth Gregory of Capital Economics described Thursday’s decision as a “hawkish cut” given the narrow vote and Bailey’s cautious message.

“It seems likely the MPC wants to see more evidence of waning inflationary pressures before embarking on further rate cuts,” according to her.

According to James Smith, economist at ING, the BoE appeared “incredibly reticent to let markets run away with the idea that this could be the start of a rapid cutting cycle”.

However, he stated that one or two other movements could occur by the end of the year.

Following European Bank

The Bank of England’s decision is the latest indication that central banks are increasingly confident that the post-Covid-19 price surge has been overcome. Earlier this summer, the European Central Bank became the first major central bank to cut rates.

On Wednesday, the Federal Reserve indicated that borrowing costs could be slashed as early as September.

On Thursday, the BoE predicted that headline inflation would rise from 2% to 2.7% this year before declining. It also stated that it anticipates consumer price inflation to fall to 1.7% by 2026, then to 1.5% in 2027.

The Bank of England also raised its prediction for GDP growth this year to 1.25 percent from 0.5%, with a 1% expansion predicted in 2025.

Minutes from Thursday’s decision show that the MPC was profoundly divided on the move. Some of those who chose to cut admitted that the decision was “finely balanced”.

Rate-setters, including the bank’s chief economist Huw Pill, rejected the drop, warning that domestic inflationary pressures were “more entrenched”.

Pill, along with external members Megan Greene, Jonathan Haskel, and Catherine Mann, spoke out against the rate increase.

Bailey, the BoE’s new deputy governor Clare Lombardelli, Sarah Breeden, Dave Ramsden, and external member Swati Dhingra all supported the cut.

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Keir Starmer Rejects Meeting With WW2 Veteran Over Her Frozen Pension

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"It's the injustice of it that is so unfair, the fact that we were never warned."

UK Prime Minister Keir Starmer has rejected a request from a 99-year-old WW2 for a meeting to discuss the frozen state pension policy for citizens living abroad. Starmer declined the meeting but offered an alternative meeting with Pensions Minister Emma Reynolds.

Anne Puckridge, who turns 100 this month, went from her home in Canada to agitate Keir Starmer’s Labour government over the state pension freeze.

The World War II veteran told the BBC that she is “angry” and “heartbroken” following a meeting with the pensions minister, who led her to believe that the government will not reconsider its policy of freezing the state pensions of some British people living abroad.

Anne Puckridge is one of approximately 453,000 British retirees living overseas who do not receive an annual increase in their state pension.

Pensions Minister Emma Reynolds agreed to a meeting after Sir Keir Starmer’s request to meet was denied owing to purported “pressures on his diary.”

Ms. Puckridge stated that the meeting in Parliament left her feeling “bitterly disappointed” and “disgusted”.

She stated that she had the idea Reynolds had been “polite enough and kind enough to come in and spend her time with her,” but that her mind had already been made up before the meeting began.

Ms Puckridge stated that she and her other campaigners would have to think carefully about what they could do from now on, but she assured them that they would take action.

State Pension Minister Reynolds thanked Ms Puckridge for the meeting and for sharing her insights.

A Department for Work and Pensions (DWP) representative stated that the government recognizes that “people move abroad for various reasons, and we provide clear information on how this can affect their pensions.”

The policy of increasing the UK state pension for recipients living abroad has existed for many years.

Since she relocated to Canada in 2001 at the age of 76 to live closer to her daughter, Ms Puckridge has received £72.50 (C$129.00) per week.

Her state pension is now less than half the £169.50 (C$302.00) paid to seniors still residing in the United Kingdom. She told the BBC that frozen pensions touch all aspects of life.

“You’ve got to be careful about entertainment,” she told me. “You must realize that you cannot be as kind to your grandkids as you would like.

“You feel you’ve lost all sense of dignity, the government has thrown you away, you know, out of sight out of mind.”

Ms. Puckridge stated that when she alerted the Department for Work and Pensions (DWP) that she was moving to Canada, “they never said a word about [my] pension being frozen”.

“The first I knew about it was when my first rise was due,” she recalled.

“I didn’t understand it. So I wrote and enquired about it, and I was told no… you will not receive any additional pension rises when you leave the UK.” She said, “It’s the injustice of it that is so unfair, the fact that we were never warned.”

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Air Force Drones Spotted Over UK Military Bases

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The drones were not considered hostile, the USAF said,

British military expertise has been brought in to assist in identifying persons responsible for flying Air Force drones near US military locations. According to the BBC, 60 RAF troops have been dispatched to assist the US Air Force with its probe.

The Air Force drones were not deemed hostile, according to the USAF, who added that the sightings “fluctuated and varied between the bases” and “ranged in sizes and configurations”.

According to the Ministry of Defence, “We are supporting the US Air Force response.”

The announcement follows several recent reports of unmanned aerial vehicles sighted near RAF Lakenheath and RAF Mildenhall in Suffolk and RAF Feltwell in adjacent Norfolk.

There have been other reports of drone activity overnight. According to the USAF, the vehicles were few in number and modest in size.

A representative for the US Air Forces in Europe stated, “We can confirm that there were sightings yesterday during nighttime hours, but the number fluctuated and varied between the bases throughout the night.”

The official stated that since the first sightings on November 20th, there has been “no impact on residents or infrastructure, and they have not been identified as hostile.”

However, the Air Force drones remained under surveillance “to ensure the safety and security of the installations.”

They said, “We request individuals in the area to contact either local police or security forces if they see anything suspicious.”

Treat threats seriously’

Officials in the United States and the United Kingdom have not said who is responsible for the recent drone activity.

However, the BBC understands there were worries that a state actor could be involved.

In recent months, intelligence officials have warned of increasing Russian sabotage operations against Western countries supporting Ukraine.

RAF Mildenhall is primarily home to the USAF’s 100th Air Refuelling Wing; RAF Lakenheath is home to USAF F-35A and F-15E fighter jets; and RAF Feltwell is mainly concerned with logistics and provides housing for military personnel.

A spokesman for the MoD, which owns the bases, said: “We take threats seriously and maintain robust measures at defence sites.

“We are supporting the US Air Force response.”

The USAF has not said who it believed to be behind the incidents.

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General Election Petition in UK Hits 2 Million Signatures

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Starmer has ruled out an general election after a petition reached two million signatures

British Prime Minister Keir Starmer has ruled out holding an early general election after a petition calling for a second vote garnered two million signatures.

Over the weekend, a petition calling for another general election was started on the UK Parliament website. It cited Starmer’s failure to keep all his pledges made in the run-up to the previous election. By Monday mid-morning, it had surpassed two million signatures.

When asked about the petition, Starmer said he was “not surprised” that some individuals who did not vote for Labour in the previous election want a “re-run” of the poll.

He claimed that he had “inherited a lot of problems” from the previous administration and had resolved to “take the hard decisions first.”

Starmer ruled out an early general election, stating that only the Prime Minister can request that the King call a general election; it simply will not happen, he said.

This petition, started last week and sponsored by Reform UK leader Nigel Farage, calls on the government to schedule a new general election.
To sign a petition, you must verify that you are a British citizen or resident and provide a postcode.

The petition states, “I would prefer there to be another general election. I believe the present Labour government has broken the pledges they made before the last election.”

The petition comes only five months after Labour won the July general election with 9.7 million votes and 412 seats in the House of Commons.

However, the Labour Party garnered only 35% of the vote, the lowest percentage gained by a single-party administration since the conclusion of WWII.

Some of the policies implemented by Starmer and his Labour government have received significant criticism, including an inheritance tax on farms, a reduction in winter heating payments, an increase in employers’ national insurance, and applying VAT to private school fees.

According to the most recent Ipsos political pulse poll, the Labour Party is unpopular, with 28% of the public favoring it and 49% opposing it.

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