The Lloyds share price has rebounded in the past few days, moving from a low of 77.40p earlier this month to 84.22p today. LLOY has jumped by over 68% from its lowest level this year, bringing its market cap to over £50 billion.
Bank of England interest rate decision
The main catalyst for the Lloyds share price is the upcoming Bank of England (BoE) interest rate decision. Economists expect the bank to leave rates unchanged at 4.0% after it slashed them by 0.25% in the previous meeting.
Traders and economists will be watching at the composition of the votes. The consensus is that 2 of the nine officials will vote for a cut, while seven will vote to leave them unchanged.
The BoE is concerned that the country’s inflation is still stubbornly high and that a rate cut will worsen the situation.
A report by the Office of National Statistics (ONS) that will come out on Wednesday is expected to show that the headline consumer price index (CPI) remained unchanged at 3.8% in August, while the core figure slipped slightly to 3.6%.
These numbers, if accurate, will remain stubbornly above the BoE’s target of 2.0%. They will also confirm the view that the UK is now in a stagflation, a period characterized by high inflation and slow economic growth.
Bank of England’s interest rates have an impact on Lloyd share price because it is the biggest mortgage lender in the country. In theory, its profits normally rise when interest rates are high as doing that boosts its net interest income (NII).
The most recent numbers showed that its underlying net interest income rose from £6.33 billion in the first half of 2024 to £6.65 billion this year. Higher rates will ensure that the company continues making these huge profits.
The other income also continued rising, reaching £2.96 billion, up from £2.73 billion in the same period last year. This growth brought its total net income to almost £9 billion.
Lloyds share price has also rebounded as the government has ruled out a windfall tax for banks to fund its deficit. The tax would have affected its profitability over time.
Additionally, the company is planning to lay off thousands of workers. According to the FT, the company plans to lay off about 3,000 of its 63,000 workers who are deemed to be underperforming. The company said:
“In line with wider industry practice, we continuously look for ways to help our colleagues perform at their best. We know change can be uncomfortable, but we are excited about the opportunities ahead as we propel forward to achieve our growth ambitions and deliver exceptional customer experiences.”
Lloyds share price technical analysis
The daily timeframe chart shows that the LLOY stock price pulled back and hit a low of 77.40p in August as fears of a windfall tax rose.
It has now rebounded to 84.35p, a notable level that coincides with the lower side of the rising wedge pattern, one of the most bearish signs. As such, there is a risk that the stock has formed a break-and-retest pattern, which often leads to a breakdown.
Therefore, while the bullish outlook may continue rising, there is a risk that it may resume the downtrend now that it has formed a break-retest pattern.
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