Interest rates – live: Bank of England to make latest decision after inflation higher than expected

Waitrose is set to open its first full-size supermarket in seven years as part of a multi-million-pound expansion plan.

The new 30,000 square foot store, located in Brabazon, a new town in North Bristol, is anticipated to open its doors in 2027.

The move follows a multi-million-pound agreement by parent company the John Lewis Partnership, signalling a renewed focus on larger retail formats.

Developed in partnership with YTL Developments, the new supermarket is expected to create approximately 150 jobs in the area.

Time for a quick look ahead – the Bank of England will be announcing in about three hours their latest interest rates plan, so here’s how factors come together to make that call.

Inflation remained higher than expected for May when data came out yesterday.

The aim is for a 2 per cent inflation rate, and we’re way above that for now, which is a push for the BoE to keep interest rates higher.

Higher interest rates are an incentive for businesses to make fewer investments in projects or hiring, which in turn lowers wage growth or jobs, which means less spending power for people, lower demand and thus helps to stem price rises…which is, basically, inflation.

However – the government really want a growing economy, and for that businesses need lower interest rates to encourage them to produce, spend and hire more.

That’s a big ongoing battle right now.

But slowing wage growth, rising unemployment rate, the potential for the price of oil to surge due to the situation in Iran right now and other geopolitical forces are all also pulling and pushing inflationary or deflationary forces all the time.

The BoE must balance all this, and decide the course of action to take every few weeks – including today.

The Swiss National Bank has highlighted major risks to the global economic outlook, including high public debt, geopolitical tensions and a stretched US stock market.

“Several risk factors could amplify the impact of potential negative shocks on global economic and financial conditions,” the SNB said in its 2025 Financial Stability Report.

The central bank has urged higher regulatory systems and backed proposals by the Swiss government to prevent future banking crises.

Considering domestic inflation data, overall investor caution and everything going on with Iran, the US and beyond, perhaps not surprising the FTSE is down this morning.

The 100 is down 0.4 per cent in early trading, with the 250 down 0.72 per cent.

In Europe it’s a similar story:

German DAX: -0.6 per cent

French CAC 40: -0.65 per cent

Euronext 100: -0.5 per cent.

While the BoE’s decision lies ahead, last night the US decision-maker, the Federal Reserve, made their own call and opted to sit tight.

After the Fed held interest rates to 4.25-4.50 per cent, Quilter’s investment strategist Lindsay James explained the factors at stake and why it’s set to irk President Trump.

“Amidst the geopolitical and economic chaos, the Federal Reserve has opted to keep its foot off the pedal and continue to hold rates. The move – or lack thereof – seemed inevitable given President Trump’s tariffs are still yet to be finalised but look likely to weigh further on the economy in the coming months, particularly as the 90 day pause nears its end, and the turmoil in the Middle East remains unpredictable.

“In the March release of the policy makers’ dot plot, two more rate cuts were anticipated this year. Now, while the median remains the same for 2025, it seems progress towards lower interest rates could slow even more as policy makers were split over whether there would be no cuts or even as many as three. The Fed’s ‘slow and steady’ approach could spark further tension with Donald Trump, whose pressure to cut rates has had little effect.”

After US stocks finished pretty much flat yesterday, shares in Asia dropped considerably overnight.

The Shanghai Composite (-0.8 per cent), the Nikkei 225 (-1.0pc) and the Hang Seng (-2.0pc) all suffered outflows.

Early futures are all showing broader drops for the US markets ahead of trading later today, with the Nasdaq 0.4pc down and the S&P 500 down by a third of a per cent in pre-trading.

Vodafone have been on a turnaround plan which shows signs of working in several areas, with debt reduced, growth in Africa and the UK merger with Three now complete.

They have now announced Pilar Lopez will be their new CFO, incoming from Microsoft where she is COO for Western Europe, having previously worked at Spanish telecomms company Telefonica.

Additionally, she sits as a non-executive director at Inditex, the firm which owns Zara, Massimo Dutti, Stradivarius and the like.

Ms Lopez will replace Luka Mucic, who is heading to a German DAX-listed company in November.

If you missed it yesterday: UK inflation has held at a higher than expected rate after air fares and motor fuel dropped in price.

The Office for National Statistics said that its key measure of inflation, the consumer prices index, was 3.4 per cent in May – having also been 3.4 per cent after revised figures in April, its highest level for more than a year.

Inflation in the UK had been dropping, having reached a high of 11.1 per cent in October 2022. A rise for April was expected due to raised labour costs, rising energy bills and changes to social housing costs, among other factors. But the leap was above the expected figure and led Chancellor Rachel Reeves to acknowledge disappointment at the rise.

A drop in some areas for May will therefore be taken as a limited positive, though inflation remains some distance above the Bank of England’s government-mandated 2 per cent target.

While fuel dropped for May, food prices increased to the highest rate in 12 months, while household goods also went up.

Here’s a chart of how the interest rate has changed over the past few years.

The post-financial crash years were extremely low – cheap money for all, basically.

But a huge rise in inflation – through energy costs and more – from 2022 saw the rate pushed as high as 5.25 per cent, before now slowly decreasing again.

The base rate – currently at 4.25 per cent following cuts in February and May – impacts consumers and taxpayers through everything from their mortgages to savings, so what do experts foresee both next week and beyond?