No more delays on rate cuts: Bank Of England must stop the groupthink, says MAGGIE PAGANO

It’s looking like a racing certainty that interest rates will be cut this summer, and hopefully, in time to celebrate next month’s Midsummer’s Day.

That’s the clear signal from yesterday’s speech by Ben Broadbent, the outgoing deputy governor of the Bank of England, who said that if the economy evolves as expected, then rates will be cut this summer. Some of us would say: ‘About time too!’

The intervention of Broadbent is both timely and significant because he’s never been outvoted before by colleagues on the Bank’s Monetary Policy Committee (MPC). 

It’s timely because the next MPC meeting – on June 20 – will also be his last before standing down after 13 years.

And it’s significant because Broadbent was explicit about what MPC members will look for when assessing the data.

While the direct effect on inflation of the pandemic and the Ukraine war have subsided, he said, what matters now is how long the impact of inflation will linger.

And the data is looking positively sunny, suggesting that second-round effects are wearing off fast.

Inflation figures out tomorrow, for April, are expected to show a big fall to 2.1 per cent for April from March’s 3.2 per cent, the lowest since September 2021. 

Some experts forecast it might fall below the Bank’s 2 per cent target and average out at 2.2 per cent for 2024, before dropping to 1.5 per cent next year.

Food prices are falling fast. So are energy prices. Interest rates have been at 5.25 per cent since August, after 14 rate hikes.

Higher rates have more than done their job, crucifying millions of home-owners with enormous mortgages, forcing millions to rein in their spending and leaving small businesses with mounting loans.

Wage growth is stalling and money supply contracting. Now is the time to trim them to 5 per cent in June, followed by another cut later in the summer.

Broadbent has been part of the MPC’s groupthink, which led to the Bank being too slow in putting rates up because members believed inflation was transitory. He can bow out on a high and vote for a cut.

Golden copper

All that glitters shines brighter than ever. Gold, silver and copper prices are soaring to record highs but for different reasons.

It climbed another 1 per cent to almost $2,450 per ounce fuelled by fears of greater Middle Eastern tension following the death of Iran’s president in a helicopter crash while Saudi Arabia’s crown prince cancelled a visit to Japan because of the ill-health of King Salman, his father.

There’s just no stopping gold lust, which is powered by hopes that the US Federal Reserve will make a couple of interest rate cuts this year but also because it’s seen as a safe haven.

Once again, China is the big buyer – the People’s Bank of China bought another 60,000 troy ounces to add to its stash in April, the 18th month of gold purchases.

Copper is also reaching new heights, rising 4 per cent to $11,104.50 a metric ton on the London Metal Exchange. It’s already jumped 28 per cent this year.

Whereas the gold price is often driven by fear, copper’s rise reflects a more optimistic industrial outlook around the world, particularly in China.

Copper is in such demand because with the energy transition moving towards electrification, more will be needed in everything that moves, from cars to heating.

Like lithium and cobalt for batteries, copper is the new darling of the commodity markets.

Don’t throw away those old pipes!

Blow to AIM

You can’t blame the bosses of Keywords Studios for welcoming a generous £2billion bid for its video game services group.

Listed on AIM, the offer for Keywords from Sweden’s EQT private equity house is 70 per cent above last Friday’s bid.

That’s some premium although shares are well below the 3300p peak reached during the lockdown tech bubble.

It’s yet another blow for the London Stock Exchange’s junior market, which is witnessing an exodus of companies, either through takeovers or because they are choosing to de-list because the market is too expensive and bureaucratic.

When will British investors wake up to the jewels in front of their screens?

And when will AIM get to grips with its problems?