US headline and core inflation have just come in above consensus, at 3.5% and 3.8% respectively.
With the US Federal Reserve now having less incentive to cut rates, Newspage asked brokers if this hotter than expected print across the pond could be bad news for UK borrowers.
Reaction:
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“This is the one thing we didn’t want to happen.
“With US inflation running hotter than expected, the ‘higher-for-longer’ narrative pushed by the Fed and Bank of England is coming true.
“This slams the door shut for any hope of a base rate cut before June, at the very least, and will add to the pressure felt by borrowers who were desperately hoping to see mortgage rates falling by now.”
Katy Eatenton, mortgage and protection specialist at Lifetime Wealth Management:
“If the UK follows the US, this hotter print across the pond may mean a rate cut by the Bank of England has now been bumped back even further.
“Hopefully the next set of UK inflation data is better than anticipated and the Bank of England makes changes without mimicking the US.
“I predicted the first base rate reduction wouldn’t be until the end of the summer and that now seems more likely.”
Justin Moy, managing director at EHF Mortgages:
“This is potentially bad news for UK mortgage borrowers to hear from the US, as increasing inflation typically pushes rates up, not down.
“The mantra of ‘Higher for Longer’ can no longer be ignored, and the Bank of England won’t cut rates until the US do the same with their interest rates.
“So much of our economy rests on the monetary policies of other countries that I don’t see us sticking our necks out to cut for a few months’ yet.”
Michelle Lawson, director at Lawson Financial:
“Dismal news coming from the US. Is the UK brave enough to go it alone?
“All eyes are now on our own inflation results on 17th April, which will hopefully be a better guide on interest rates for beleaguered British borrowers and our broken economy.”
Dariusz Karpowicz, director at Albion Financial Advice:
“With US inflation figures coming in hotter than expected, it does seem like the Fed might put the brakes on rate cuts.
“Given the trend of the UK’s monetary policy often echoing the Fed’s moves, UK borrowers could indeed find themselves in a bit of a wait-and-see situation.
“The anticipated rate cut from the Bank of England might just take a bit longer to materialise, aligning with this latest development across the pond.”
Rohit Kohli, director at The Mortgage Stop:
“Economic performance in the states is piling pressure on other central banks to hold fire on any rate cuts, as inflation starts to heat up across the pond.
“Likely, the Fed will now wait before taking action, which will worry borrowers here in the UK as it likely means waiting longer before the Bank of England cuts rates.”
Ben Perks, managing director at Orchard Financial Advisers:
“US inflation coming in hotter than forecast could frustrate UK borrowers.
“This likely means the US Federal reserve will hold off on any cuts in the near term.
“The Bank of England have always been guilty of copying our friends across the pond, so this could give them the excuses they need to hold off on any reduction for longer.
“If our inflation data is improved, I hope they have the courage to move out of the FED’s shadow and make the much-needed cuts to the base rate UK borrowers need.”
