Mounting pressure is being felt by the Bank of England to further cut interest rates as job vacancies decline and factory output contracts, suggesting an economic slowdown.
According to the Recruitment and Employment Confederation (REC), job vacancies fell by 3.2% in August, resulting in nearly 720,000 new advertisements and reflecting a sluggish job market. Britain’s factory output has also contracted for the first time since late 2020. Data from Make UK, the manufacturing industry body, revealed that manufacturers are holding back on hiring due to declining industrial output, further highlighting broader economic concerns.
This contraction marks the first decline in factory output in four years, adding weight to calls for a further reduction in interest rates. The Bank of England’s monetary policy committee (MPC) is set to meet this Thursday to discuss interest rates. Last month, the MPC reduced the base rate from 5.25% to 5%, the first cut in four years, as part of efforts to support economic growth.
However, Bank of England Governor Andrew Bailey has urged caution, warning that rates should not be cut too quickly or significantly to ensure continued progress in reducing inflation. Despite the economic slowdown, investors currently expect the Bank of England to hold rates steady this week. Andrew Bailey’s cautionary stance reflects a balancing act between supporting growth and maintaining control over inflation.
Neil Carberry, Chief Executive of REC, noted the broader impact on the jobs market, stating, “There is no doubt that the jobs market remains slow by comparison to previous years, with summer holidays also affecting the pace of hiring.” Therefore, as the UK economy navigates this period of uncertainty, all eyes will be on the Bank of England’s decision and its potential implications for businesses, consumers, and the broader economic landscape.
The pressure to ease monetary policy is tempered by the need to sustain progress on inflation, making this week’s rate decision a critical moment for the UK’s economic outlook.
As the Bank of England deliberates over interest rates amidst an economic slowdown, the outcome will be closely watched for its profound implications on the UK’s economic stability and growth trajectory.