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BoE cuts rates but vote is closer than expected 

An August rate cut by the Bank of England (BoE) was always on the cards, but voting was much closer than expected. On Thursday, an unprecedented tie in the voting forced a second vote with policymaker Andrew Taylor (in round one he was the only person calling for a 50-basis point cut) changing his vote to back a 25-basis point cut.  

Slowing growth, rising inflation and the rapidly declining jobs market were key reasons why four of the members wanted to slow the interest rate cutting cycle by voting against a cut. The Bank’s Governor, Andrew Bailey, concluded “it was a finely balanced decision” and reiterated that “future cuts will need to be made gradually and carefully.”  

The Chancellor, Rachel Reeves, tried to claim credit for the rate cut saying, “the stability we have brought to the public finances through our plan for change has helped make this possible”. Her Autumn Budget has a lot of work to do to address sluggish growth, climbing inflation and rising unemployment and reports in the press suggest Reeves will soon start laying the groundwork for what will be a difficult budget. Treasury sources are currently ruling out increases in income tax, national insurance (NI) and VAT, but a rise in gambling levies is thought to be nearly guaranteed at this point.  

Trump threatens India with additional 25% tariff 

Trump signed an executive order that would place an extra 25% tariff on India in 21 days’ time (27 August) if they continued to purchase Russian oil.  

So far this year, Russia has sold an average of 1.75 million barrels of oil a day to India. Russia is the biggest seller of oil to India, making up 35% of its overall supplies. Trump believes imports of Russian oil are undermining US efforts to stop Russia’s war in Ukraine, and said we’re going to see “a lot more… secondary sanctions” aimed at curtailing Putin’s ambitions.  

The Federation of India Exports Organisations called the additional tariff “extremely shocking”, adding that it will hit 55% of India’s exports to America and lead to rising costs for US consumers. The additional tariff would severely impact India’s major exports of electrics, textiles and gems. Last week, India held its key interest rate at 5.50% citing “trade negotiation challenges” as a key reason for not cutting rates.  

In the US, an Apple share price surge helped the Nasdaq reach record highs. Apple reported its biggest revenue growth since December 2021 with sales of iPhones up 13% year on year. White House officials also announced the company has pledged to invest another $100bn towards manufacturing more of its products in the US.    

Chinese steel exports rise despite tariffs and trade barriers 

China continued to defy Trump’s attempts to reorder global trade and the trade barriers imposed by Vietnam and South Korea – who have imposed their own tariffs to protect domestic manufacturers from cheap Chinese steel – as steel exports continued their record-breaking run. Steel exports rose by 1.7% in July as 9.84 million metric tons were shipped across the globe. Taking total exports this year to nearly 68 million tons, the highest level since 1990.