No more postponement of interest rate cuts: Bank Of England must stop groupthink, says MAGGIE PAGANO

It looks like interest rates will be cut this summer, hopefully in time to celebrate Midsummer’s Day next month.

That is the clear signal from yesterday’s speech by Ben Broadbent, the outgoing deputy governor of the Bank of England, who said that if the economy develops as expected, interest rates will be cut this summer. Some of us would say, “It’s about time!”

Broadbent’s intervention is both timely and significant, having never before been outvoted by colleagues on the Bank’s Monetary Policy Committee (MPC).

It comes at just the right time, as the next MPC meeting – on June 20 – will also be his last before he steps down after thirteen years.

And it’s significant because Broadbent was explicit about what MPC members will look for when assessing the data.

While the direct effect of the pandemic and the war in Ukraine on inflation has diminished, he says, the issue now is how long the impact of inflation will last.

And the data looks positively sunny, suggesting second-round effects are fading quickly.

April inflation figures are expected to show a big drop to 2.1 percent for April, down from 3.2 percent in March, the lowest since September 2021.

Some experts predict it could fall below the Bank’s 2 percent target and average 2.2 percent for 2024, before falling to 1.5 percent next year.

Food prices are falling rapidly. This also applies to energy prices. The interest rate has been 5.25 percent since August, after fourteen interest rate increases.

Higher interest rates have more than done their job, crucifying millions of homeowners with massive mortgages, forcing millions to rein in their spending, and leaving small businesses with mounting loans.

Wage growth is stagnating and the money supply is shrinking. Now it’s time to cut them back to 5 percent in June, followed by another cut later in the summer.

Broadbent has been part of the MPC’s groupthink, which led to the Bank being too slow to raise rates because members believed inflation was transitory. He can bow at a moment’s notice and vote for a cut.

Golden copper

Everything that glitters shines brighter than ever. Gold, silver and copper prices are rising to record highs, but for different reasons.

It rose another 1 percent to almost $2,450 an ounce, fueled by fears of heightened tensions in the Middle East following the death of Iran’s president in a helicopter crash, while Saudi Arabia’s crown prince canceled a visit to Japan due to poor health of King Salman, his father.

There is simply no end to the gold lust, which is fueled by hopes that the US Federal Reserve will implement some interest rate cuts this year, but also because the country is seen as a safe haven.

Once again, China is the big buyer: The People’s Bank of China bought another 60,000 troy ounces to add to its stockpile in April, its 18th month of gold purchases.

Copper is also hitting new highs, rising 4 percent to $11,104.50 a tonne on the London Metal Exchange. This year it has already increased by 28 percent.

While gold prices are often driven by fear, copper’s rise reflects more optimistic industrial prospects around the world, especially in China.

There is such a demand for copper because, as the energy transition moves towards electrification, more will be needed in everything that moves, from cars to heating.

Like lithium and cobalt for batteries, copper is the new darling of the commodity markets.

Don’t throw away those old pipes!

Blow to TARGET

You can’t blame Keywords Studios bosses for welcoming a generous £2 billion bid for their video game services group.

The offer for Keywords from the Swedish private equity house EQT, listed on AIM, is 70 percent above last Friday’s offer.

That’s a premium, although the shares are well below the 3300p peak reached during the lockdown tech bubble.

It is yet another blow to the London Stock Exchange’s junior market, which is witnessing an exodus of companies, either through takeovers or because they choose to delist because the market is too expensive and bureaucratic.

When will British investors wake up to the jewels on their screens?

And when will AIM face the problems?