Adam Ruddle, LV= Chief Investment Officer, shares his view on the Bank of England announcement
“The Bank of England’s decision to once again hold rates at 3.75% was widely expected. The conflict in Iran has led to major disruption around the Strait of Hormuz, a key global trade route. This is causing shortages in oil and, importantly, in fertiliser – something that doesn’t make headlines as often, but plays a crucial role in food production.
“Oil prices have jumped by more than 40% since the conflict began, pushing up costs for transport, energy and everyday essentials. At the same time, fertiliser shortages mean more farmers are struggling during the spring planting season, which is likely to result in higher food prices later in the year.
“This comes at a time when the UK economy is under increasing strain, with rising unemployment and falling GDP feeding through to household finances. Our Wealth and Wellbeing research shows that half of UK adults have already adjusted their financial behaviour over the past year; among investors, one in five have diversified their portfolios, and one in ten have moved money to cash or low risk investments. With markets remaining volatile, taking informed steps and considering professional guidance can be beneficial.
“Against this backdrop, the Bank of England has opted to hold interest rates today. The outlook remains finely balanced: rates could rise if inflation gains momentum, or fall if economic conditions continue to weaken. For consumers and investors alike, staying informed and seeking guidance will be essential as the landscape evolves.”
“The Bank’s stance is very much a ‘wait and see’ approach, as the inflation outlook depends on how long the conflict continues and when the Strait of Hormuz can fully reopen – although we believe the damage is largely already done, with higher food prices likely over the next 18 months. We remain confident that our globally diversified strategies are well positioned to deliver risk-adjusted returns.”
