The Bank of England could delay cutting interest rates until September as the UK economy is boosted by Taylor Swift‘s Eras Tour, analysts have claimed.
The pop star has already played sell-out shows in Edinburgh, Liverpool and Cardiff as well as three in London – and will head back to Wembley this August for five more.
Swift’s fans, known as ‘Swifties’, are expected to boost the London economy alone by £300million as the capital hosts more Eras Tour shows than any other city in the world, with nearly 640,000 people expected to attend across the eight dates.
The Bank’s Monetary Policy Committee (MPC) voted last Thursday to keep interest rates unchanged at a 16-year high of 5.25 per cent for the seventh time in a row.
Many analysts expect the next cut to be in August, but experts at London investment bank TD Securities believe the economic boost Swift’s concerts are giving Britain is so significant that it could be enough to defer the reduction until September.
The interest rate is shown since 2018 along with a forecast from Capital Economics which thinks the first cut will come in August, and it could fall to 3 per cent by the end of 2025
Taylor Swift performs during her Eras Tour at Wembley Stadium in London last Saturday
The inflation rate hit the Bank’s 2 per cent target in May for the first time in nearly three years
The bank’s macro strategist Lucas Krishan and its head of global macro strategy James Rossiter made the claim in a note on June 14, reported CNBC.
They said: ‘We still anticipate a BoE cut in August, but the inflation data for that month might keep the MPC on hold in September.’
The analysts pointed out that a potential clash with one of Swift’s Wembley concerts between August 15 and 20 and a key inflation index day could skew the data and influence the MPC’s decision.
Mr Krishan and Mr Rossiter added that a ‘surge in hotel prices then could be material’, temporarily adding as much as 30 basis points to services inflation and 15 basis points on headline inflation.
They also said that while her Cardiff date coincided with this month’s inflation index day, the impact would have been lesser given the smaller size of the city to London and just one date there.
Fans walk towards Wembley Stadium last Friday ahead of Taylor Swift’s first London concert
Fans outside Wembley Stadium ahead of Taylor Swift’s first London concert last Friday
Taylor Swift performs during her Eras Tour at Wembley Stadium in London last Sunday
The Bank did not respond specifically to the comments by TD Securities when contacted by MailOnline today, but a spokesman said that the MPC ‘look at a wide range of economic indicators when they make their decisions on interest rates’.
It comes after a Barclays ‘Swiftonomics’ report issued last month found Swift’s tour is expected to provide a £997million boost to the UK economy.
Some 1.2million fans are estimated to be spending an average of £848 on tickets, travel, accommodation, outfits and other costs to see the star at one of her 15 UK tour dates – more than 12 times the average cost of a night out.
But Oxford University research economist Ben Ramanauskas said that while Swift will have an impact on local economies, it would be a mistake to delay an interest rate change.
He wrote in the Evening Standard: ‘We do see an increase in demand for services such as those in hospitality whenever there is a Swift concert. This will worry the MPC, not least of all services inflation has remained stubbornly high in the UK, but it shouldn’t base its decision on this.
Taylor Swift performs during her Eras Tour at Wembley Stadium in London last Friday
Taylor Swift on stage at Wembley Stadium in London last Friday during her Eras Tour
‘The Eras Tour might represent a shock to the economy, (but) it will only be a temporary one as Swifties around the UK will lament – they’re prepared to pay a small fortune to see her as she is only performing for a few nights.
‘As such, the impact of Swift on the economy will not be permanent and so things should swiftly return to normal.
‘What is more, while we may not be in a new era, the economy has turned a corner as the core drivers have subsided and inflation is returning to target.’
Last Thursday, the Bank kept interest rates unchanged ahead of the General Election on July 4, but revealed that the vote was increasingly ‘finely balanced’.
The decision came a day after official figures showed that the rate of inflation hit the Bank’s 2 per cent target in May for the first time in nearly three years.
‘It’s good news that inflation has returned to our 2 per cent target,’ Andrew Bailey, the Bank’s governor said last Thursday. ‘We need to be sure that inflation will stay low and that’s why we’ve decided to hold rates at 5.25 per cent for now.’
Taylor Swift performs during her Eras Tour at Wembley Stadium in London last Sunday
TD Securities macro strategist Lucas Krishan (left) and its head of global macro strategy James Rossiter (right) analysed how Taylor Swift’s concerts could impact interest rates
But members of the nine-person committee were split over the decision with two policymakers, Swati Dhingra and Dave Ramsden, voting again for rates to be reduced this month.
Furthermore, it appeared that it was a close call for three other members of the MPC who were wavering on whether to keep rates unchanged.
For those members – understood to have included Mr Bailey as well as deputy governor Ben Broadbent – ‘the policy decision at this meeting was finely balanced’, a summary of the committee meeting read.
They felt services inflation – an important gauge which looks only at service-related categories such as hospitality and culture, which will be strongly affected by the Swift tour – was not putting as much pressure on the overall rate.
With polls suggesting Sir Keir Starmer is on course to lead Labour to victory on July 4, an August rate cut could provide him with an economic morale boost early in his premiership.
But the Conservatives could be left questioning why Prime Minister Rishi Sunak called a summer election, when he could have benefited from interest cuts being reduced later on in the year.
