US Inflation Figures Shake Up Expectations for UK Borrowers
The latest inflation data released by the US Federal Reserve has sent shockwaves through the financial markets, particularly impacting UK borrowers. The headline inflation rate surged to 3.5%, while core inflation reached 3.8%, surpassing market expectations. This unexpected spike has significant implications for the UK’s monetary policy and the prospects of a base rate cut before June.
Broker Reactions
Lewis Shaw, Shaw Financial Services
Lewis Shaw, a prominent figure in the mortgage industry, expressed deep concern over the implications of the US inflation figures. He highlighted that the narrative of ‘higher-for-longer’ advocated by both the Fed and the Bank of England is now becoming a reality. Shaw emphasized that the elevated inflation rates in the US have effectively closed the door on any immediate hopes for a base rate cut in the UK.
Katy Eatenton, Lifetime Wealth Management
Katy Eatenton, a specialist in mortgages and financial protection, warned that if the UK mirrors the US trend, a rate cut by the Bank of England could be further delayed. She expressed hope that upcoming UK inflation data would outperform expectations, allowing the Bank of England to chart its own course independent of the US.
Justin Moy, EHF Mortgages
Justin Moy, managing director at EHF Mortgages, echoed the concerns raised by his peers, emphasizing the adverse impact of rising inflation on UK mortgage borrowers. Moy highlighted that increasing inflation typically leads to higher interest rates, contradicting the expectations of borrowers anticipating a decline in mortgage rates.
Michelle Lawson, Lawson Financial
Michelle Lawson, director at Lawson Financial, questioned the UK’s ability to diverge from the US trajectory in response to the alarming inflation figures. She underscored the significance of the upcoming UK inflation data release on April 17th as a crucial determinant of the future interest rate decisions affecting British borrowers.
Dariusz Karpowicz, Albion Financial Advice
Dariusz Karpowicz, director at Albion Financial Advice, speculated on the potential repercussions of the US inflation data on the UK’s monetary policy. He suggested that the Bank of England might delay its anticipated rate cut to align with the evolving situation in the US, reflecting the historical trend of UK monetary policy following the Fed’s lead.
Rohit Kohli, The Mortgage Stop
Rohit Kohli, director at The Mortgage Stop, highlighted the mounting pressure on central banks worldwide to refrain from immediate rate cuts in response to escalating inflation in the US. He predicted a cautious approach from the Federal Reserve, which could prolong the wait for a rate cut by the Bank of England, causing concern among UK borrowers.
Ben Perks, Orchard Financial Advisers
Ben Perks, managing director at Orchard Financial Advisers, emphasized the potential frustration facing UK borrowers following the unexpected surge in US inflation. He suggested that the US Federal Reserve’s likely decision to postpone rate cuts could influence the Bank of England to delay its own rate reduction, citing a historical tendency of the UK central bank to mirror US monetary policy decisions.
Conclusion
The prevailing sentiment among industry experts indicates a growing apprehension among UK borrowers regarding the impact of US inflation on domestic interest rates. As the Bank of England awaits crucial inflation data, the specter of delayed rate cuts looms large, underscoring the interconnectedness of global economic trends.
