The week ahead 05 May 2026 - Bank of England in no hurry to hike rates
What to watch out for in the UK economy and property market this week.
Last week saw the Bank of England, Bank of Canada, ECB and the US Federal Reserve hold their respective policy meetings, and all of them decided that now is not the time to raise interest rates. Inflation is up, but central banks typically want to see evidence that higher fuel prices are causing other prices to rise. This usually only happens if the increase in energy prices becomes protracted, something that is looking possible but is not yet certain. The central banks mentioned above are also facing slowdowns in labour market conditions, and therefore policymakers are reluctant to further pour cold water on the situation with an interest rate hike.
Remarks by the Bank of England Governor, Andrew Bailey, at the press conference following Thursday’s Monetary Policy Committee (MPC) meeting, re-enforced the message that a Base Rate rise is not imminent. Indeed, Bailey pointed out the risks of hiking rates in response to higher oil prices. Base rate increases tend to take around a year to impact the economy, and by that time, energy prices might have fallen. Our full analysis of the MPC meeting can be found here.
On the subject of oil prices, last week saw the United Arab Emirates (UAE) withdraw from the OPEC cartel. The move is thought to be prompted in part by differences on foreign policy with other OPEC nations. Also, UAE is now planning for a future where many countries rely less on fossil fuels and more on renewable energy sources. Consequently, the Gulf state wants to sell more oil and gas in the short- to medium-term in order to invest the revenue in diversifying its economy. This is a reminder that while oil is expensive at present, prices could rapidly come under pressure when the Strait of Hormuz eventually re-opens.
Nationwide reported a surprise increase in its UK house price index in April, which was up by 0.4% month-on-month, defying a consensus forecast of a -0.3% fall. The increase came despite rising mortgage rates and weakening consumer confidence, demonstrating the underlying strength of housing demand.
This week sees the publication of car sales data for the UK and US employment numbers.
Presently, consumer sentiment has been declining, which would normally bode ill for an expensive purchase like a car. However, there have also been reports from search engines and car sales web sites of increased searches for electric vehicles. Drivers switching to battery or hybrid cars in the face of high petrol prices could support the April car purchases figures.
Turning to the US jobs markets, there have been reports of large tech firms making redundancies. We believe this probably caused a deceleration in the jobs market in April.
This week’s figures
TUESDAY 5 May
UK New Car Sales, y-on-y, April
6.6% PREVIOUS
5.0% FORECAST
Given recent reports of large numbers of searches for electric vehicle prices on the internet, we are predicting a rate of growth for car sales in April that is slower than March but still robust.
FRIDAY 8 May
US Non-farm Payrolls, April
178k PREVIOUS
80k FORECAST
The March data showed a stronger than expected increase in job creation. However, given this indicator has been volatile lately, and there are reports of job losses in the tech sector, we are forecasting a deceleration in April.
