As had seemed inevitable, the Bank of England yesterday acted in line with market expectations and increased interest rates for the 12th time in a row – up another 0.25% to 4.5%.
Whilst the extent of the substantial monetary tightening over the last 18 months has yet to be fully felt across the economy, – and we recently wrote about the long-term impact of what we consider to be a ‘game changing’ shift in the cost of debt – the Bank of England remains concerned about inflation stickiness.
Perversely, the general news flow was largely positive with upward revisions to growth projections such that a recession is no longer the central forecast, albeit with only very modest growth expected, and CPI still expected to fall sharply from April’s figures. Yet despite the lower energy price outlook, higher growth and concerns over inflation persistence have kept minds focused on perceived upside inflationary risk.
This means that it’s plausible that base rates have yet to peak, with futures markets currently pricing in a terminal rate towards 5% and economists anticipating the prospect of at least one more increase. The Bank of England’s guidance this week has kept the door open to further tightening and have said that future decisions will be evidence and data dependent. Whether this policy tool has any real impact on what still largely is supply-side driven inflation remains to be seen.
For businesses, this means that the road ahead is still uncertain and many costs are expected to be high for some time before they settle down again, continuing to apply existing pressure on cashflow strategies for many. More than ever, business owners need to ensure they have reviewed their financial options to help them keep moving, with asset-based lending offering proven routes to meeting their ambitions, whether that be to grow further or simply keep weathering the economic storms.
Turbulent financial times offer brokers and introducers the right platform to demonstrate why a whole-of-market view of the lending landscape is beneficial to businesses and how, alongside lenders such as Ultimate Finance, they can provide businesses more than much-needed funding by offering strategic insights on the current situation and expert support that can help make all the difference.