17 June 2026: The Bank of England should hold interest rates – Shadow MPC

A survey by the north-east technology giant Sage has indicated rising profitability in the SME sector but warns that late payments remain a major problem for many smaller firms.

The increase in the minimum wage and employers’ National Insurance contributions have also proved to be significant hurdles.

The Sage SME Performance Pulse, which analyses accounting data from nearly 150k SMEs across the UK, found that profit growth has accelerated consistently in recent quarters, reaching its highest level since early 2022. Sage’s data suggests profits grew by 7.4% in the year to Q1 2026, up from 5.5% previously.

Sage said SME growth remains broad-based across the UK, with the East Midlands recording the highest growth, and SME profits in the North increasing. It noted strong performances in the manufacturing, professional services, technology and finance sectors.

In recent years, Sage has positioned itself as a champion of the small-business sector, which accounts for much of the client base for its accounting software and other technologies.

Derk Bleeker, Chief Commercial Officer at Sage, said: “The UK’s small business community continues to demonstrate extraordinary resilience to adapt and grow. The fact that profitability has reached its highest level in four years is a testament to the determination and ingenuity of business owners across the country. It also highlights the opportunity that exists to help SMEs build on this momentum and unlock even greater growth in the years ahead.”

Emma Jones, the Government’s Small Business Commissioner, said: “Sage’s data shows that more needs to be done to tackle late payments, with too many small businesses still waiting weeks to be paid. That’s why action to improve payment practices is so important. It gives firms greater certainty over their cash flow and the confidence to invest, hire and grow. Tackling late payments isn’t just about fairness; it’s essential to unlocking the full potential of the UK’s small businesses.”

A “shadow” Monetary Policy Committee, comprising economists and business CFOs from across the UK, has said it believes rates should be raised to 4% when the “official” rate-setting committee meets tomorrow.

The Times reports that the shadow MPC voted 5-4 in favour of raising interest rates by a quarter of a percent to counteract price rises already baked into supply chains as a result of the war in the Gulf that began on February 28.

However, the shadow MPC’s call is not expected to be followed by the Bank of England’s rate-setting panel, with analysts forecasting a 7-2 split in favour of leaving rates unchanged at 3.75 percent.

The Department for Work and Pensions has broken its silence as the number of Personal Independence Payment claimants crosses the four million mark for the first time.

Data published by the DWP showed that 4.01 million people were entitled to claim PIP as of April this year. The DWP expects to spend £32bn on disability benefits for adults and pensioners this year alone.

Helen Whately, the Shadow Work and Pensions Secretary, said the Conservatives would make the system “fair and affordable again”. She announced details of a review of PIP as part of the party’s pledge to cut the welfare bill by £23bn.

With the future of both the Prime Minister and his Chancellor expected to become clearer following tomorrow’s by-election in Makerfield, Rachel Reeves will be under pressure from Labour backbenchers to at least maintain the current level of the welfare budget.

The pound remained within its recent range yesterday as traders and investors “kept their powder dry” ahead of events tomorrow that could substantially increase market volatility.

Sterling reached a high of 1.3443 and closed at 1.3426.

Federal Reserve Chair Kevin Warsh will announce his first rate decision later today, as markets reach record highs amid heightened inflation and debate over the Central Bank’s future direction. The S&P 500 has hit an all-time high 23 times in 2026, as investors weigh expectations for monetary policy under the new leadership.

The Federal Open Market Committee is widely expected to hold its benchmark interest rate steady in the 3.5%-3.75% range, where it has remained throughout 2026. The CME Group FedWatch Tool predicts a near 100% probability of no change, according to TheStreet. However, the real focus will be on how Warsh signals his colleagues' stance on future rate moves and inflation.

Warsh’s inaugural meeting includes a Summary of Economic Projections that provides updated forecasts for inflation, growth, and employment. Markets are bracing for a significant shift in the Fed’s communication under Warsh.

The FOMC is expected to drop its “easing bias”, the language signalling potential future rate cuts, and adopt a more balanced stance. This change would mark a formal acknowledgement that rate cuts are no longer imminent in 2026, a dramatic reversal from earlier expectations.

Analysts suggest that Warsh will face a challenging tightrope walk between the majority of Fed officials who oppose rate cuts and President Trump, who is closely watching him, even though Warsh has publicly stated that he has given the President no guarantees.

Globally, Central Banks are watching the amount of independence the Fed retains, as Trump will continue to ignore rising prices, telling reporters that “he loves the inflation”.

At the G7 meeting currently taking place in France, Trump told reporters that he has secured peace in the Middle East, fulfilling his aims for the conflict. In fact, the situation in the Strait of Hormuz will be little changed going forward, and the Iranian leadership is more radical than the one it has replaced.

Trump warned that “all hell will rain down” on Iran if it attempts to acquire a nuclear weapon. Referring to the agreement with Tehran, Trump said his primary concern is ensuring Iran never acquires a nuclear weapon, adding that the proposed agreement makes that objective unmistakably clear.

According to several media reports, Iran has long maintained that its nuclear programme is intended for peaceful purposes and has not publicly committed to surrendering its stockpile of enriched uranium. It is believed to be buried beneath three nuclear facilities that suffered extensive damage after the US launched strikes last year.

The dollar index fell yesterday as markets gave a lukewarm reception to the proposed peace deal. Risk appetite improved slightly, leading to marginal weakness in the Greenback. It fell to a low of 99.46 and closed at 99.56.

Germany has urged fellow EU member states to clinch a deal on the bloc's long-term budget "by the end of the year" after French far-right leader Jordan Bardella threatened to halve his country's contribution if he were to come to power next year.

The National Rally President, slated to be the Party's Presidential Candidate if his mentor Marine Le Pen's election ban is upheld in an appeal decision next month, vowed to challenge the EU’s long-term budget and force a rethink of how the bloc works, in an interview earlier this week.

Bardella's comments come as EU countries are in crunch negotiations over the next EU budget covering the 2028-2034 period, the so-called Multiannual Financial Framework.

High-profile centrist voices in Europe have been alarmed by the far-right leader's staunch anti-EU rhetoric, with ECB President Christine Lagarde warning against "separatist ambitions" shortly after the interview.

At an EU ministers' meeting in Luxembourg, Germany's Europe Minister Gunther Krichbaum cited Bardella's interview to press for a swift budget deal.

"Bardella has said clearly that he wants to halve France's contribution to the European Union," said Krichbaum, a member of Chancellor Friedrich Merz's centre-right CDU party. "We see what these right-wing populists want to achieve; they want to destroy the European Union, and that means we are under time pressure; we need to find a compromise by the end of this year."

The French far-right leader criticised that timeframe, calling it “profoundly anti-democratic”.

Next year’s French Presidential election has “lit a fire” under Europe’s centrist politicians, who see a swing to the right in France as a prelude to greater political volatility in the region.

The European Central Bank may raise its key interest rate again, despite the “welcome” news of a potential peace deal between the U.S. and Iran, Chief Economist Philip Lane said yesterday.

The ECB last week raised its key rate to 2.25% from 2%, becoming the first G7 central bank to do so since the start of the Middle East conflict in late February. The Bank of Japan followed closely, raising rates on Monday.

That decision was made before Iran and the U.S. announced on Sunday that they had agreed to an interim peace deal.

Lane said that although energy prices have fallen since that news, they haven’t returned to prewar levels, and he didn’t rule out a further rise in the key rate.

“Whether we do more or stay at the new level will depend on incoming data,” he said.

The ECB has outlined several paths for the eurozone economy, depending mainly on how high energy prices rise and how long they remain above prewar levels.

Lane said that future prices, as implied by trading in energy markets, are now closer to the ECB’s milder scenarios than to the more severe outcomes it has already acted upon.

The Euro traded near the top of its recent range yesterday as risk appetite responded to speculation of a peace deal between the U.S. and Iran. It reached a high of 1.1619, then paused ahead of rumoured sell orders between 1.1620 and 1.1650, and closed at 1.1608.

Have a great day!