UK Inflation Drops Below 2%; Pound Plunges; Two Rate Cuts Expected This Year
Key highlights in the UK on October 16, 2024:
● UK inflation falls below 2% for the first time in three and a half years, with the central bank expected to cut interest rates twice more this year, causing the pound to plummet in the short term
● Several UK banks slightly increase mortgage interest rates
● Statistics show: UK rental returns hit a historical high in 2024
● The UK government hopes to promote weight loss drugs to help more obese people return to work
UK inflation falls below 2% for the first time in three and a half years, with the central bank expected to cut interest rates twice more this year, causing the pound to plummet in the short term
Just now (October 16), data released by the UK Office for National Statistics showed that the UK's inflation rate (CPI) in September rose by 1.7% year-on-year, a significant decline from the previous 2.2%, and lower than the 1.9% expected by economists and the 2.1% previously anticipated by the Bank of England.
This inflation rate has reached the lowest level since April 2021 and has fallen below the Bank of England's 2% target for the first time.Specifically, the reasons for the recent slowdown in UK inflation include a significant drop in air ticket and gasoline prices, as well as a marked slowdown in service sector inflation.
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At the same time, the latest official statistics released yesterday also showed that between June and August this year, the average wage increase in the UK was 4.9%, lower than the previous 5.1%, and reached the lowest level in more than two years.
After the significant cooling of inflation, traders increased their bets on the Bank of England further significantly reducing interest rates this year, expecting the bank to cut rates twice more by the end of the year, with a total reduction of at least 42 basis points, higher than the previously predicted 35 basis points.
Specifically, the Bank of England is highly likely to announce a reduction in the base interest rate from the current 5% to 4.75% at the meeting on November 7, 2024, and then announce another rate cut on December 19.
After the latest inflation data was released, the pound dived briefly and then recovered slightly. The exchange rate of the pound against the US dollar fluctuated over the past 24 hours, once breaking through the 1.30 mark for the first time since August 20.
Several UK banks have slightly increased mortgage rates.
Despite the market's general expectation that the Bank of England will cut interest rates in November, several UK lending institutions have recently slightly increased mortgage rates.NatWest has announced that from October 17th, it will increase the interest rates on most of its two-year and five-year mortgage products by 0.3%. This follows similar small increases in interest rates on some mortgage products by institutions such as Santander and TSB.
However, analysts predict that mortgage interest rates may decrease again once the Bank of England cuts interest rates again in November.
Statistics show: Rental returns in the UK hit a historical high in 2024
According to the latest reports from British media, the average annual rental return on newly purchased rental properties in England and Wales in 2024 is 7.2%, a historical high, which is a significant increase from 6.7% last year and 6.2% in 2022. As rents continue to rise, landlords' profits have reached a historical high.
The latest data from HomeLet shows that the average rent in the UK is currently £1,331 per month, a 40% increase since June 2020.
Aneisha Beveridge said, "We expect that in the next few years, the increase in UK rents may continue to exceed the increase in house prices."
In the past two years, the rental return on buy-to-let properties has increased significantly in all regions of the UK, with the largest increase in the North West of England, from 7.1% to 8.4%. This means that landlords investing in a £200,000 property for rent can now receive an annual rental income of £16,800, more than the £14,200 two years ago.
Currently, the average rental return for buy-to-let investors in the London area is 5.7%.The UK government hopes to promote weight loss drugs to help more obese people return to work
Official statistics from the UK show that, as of 2022, 29% of adults in the UK are obese, and 64% of adults are considered overweight. UK Health Secretary Wes Streeting pointed out that diseases related to obesity cost the NHS system £11 billion per year.
Not long ago, the UK government announced a five-year trial of the weight loss drug Mounjaro in Greater Manchester.
The drug comes from the world's largest pharmaceutical company, Lilly, which invested £279 million in the trial to study whether the use of Mounjaro would reduce unemployment, sick leave due to obesity, and NHS spending on obesity-related issues.
Previous surveys have shown that diseases caused by obesity lead to some employees in the UK taking an average of 4 more sick days per year, and many people are completely unemployed due to obesity.
On October 15th, UK Prime Minister Starmer said in an interview with the BBC: "Providing weight loss services for unemployed obese people is very important for our economy and national health. On this issue, the NHS needs more money, and the government also needs to think from a different perspective to alleviate the pressure on the medical system."