The new year has kicked off with a storm of economic news in both the UK and the USA. From inflation concerns to government borrowing and mortgage rate shifts, it’s been a whirlwind start to 2025.
In this month’s Citrus Bites, Richard Harris dissects the latest economic movements, providing insight into what they could mean for the months ahead.
Key Economic Themes in January
Inflation Concerns & Interest Rates
The year started with fears of stubborn inflation, leading many to speculate that interest rates may remain higher for longer. However, recent data suggests a cooling trend, with core inflation falling to 3.2% and services inflation easing to 4.4%. While these numbers remain above the Bank of England’s 2% target, they indicate potential relief on the horizon.
Government Borrowing & Rachel Reeves’ October Budget
With the UK government borrowing £18 billion in December, concerns around rising national debt and how it will be financed have been growing. Will increased taxes be the answer?
Mortgage Market Update
Uncertainty in the economy led to swap rates increasing, pushing fixed mortgage rates up at the start of January. However, with inflation cooling, there’s hope for a stabilisation in the coming months.
Unemployment & Wages
The latest data shows unemployment rising slightly to 4.4%, while vacancies have declined significantly over the past year. This shift could help ease wage pressures, reducing inflationary risks and potentially influencing the Bank of England’s interest rate decision on February 6th.
The Bank of England’s Next Move
The big question remains: Will the Bank of England hold rates or start cutting them in 2025? With inflation showing signs of improvement but still above target, February’s announcement will be crucial for homeowners, investors, and businesses alike.
What’s Next?
The economic landscape is changing rapidly, and we’ll be following developments closely. Stay tuned for our next update when the Bank of England announces its decision on February 6th.
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