The Bank of England kept interest rates steady but signaled a cut was imminent
City of London skyline on March 6, 2024 in London, UK.
Mike Kemp | In Figure | beautiful images
LONDON — The Bank of England on Thursday announced a much-anticipated hold on interest rates after its May meeting, as it said restrictive monetary policy was having an effect on reducing inflation.
Members of the central bank’s Monetary Policy Committee voted 7-2 to leave it unchanged, then backed the cut. In the previous meeting, only one member voted for cuts.
However, the MPC warned that inflation indicators remained “remaining high”.
It kept the BOE Main Bank Rate at 5.25%.
Markets predict interest rate cuts will begin in the summer, when currency markets fully price in a 25 basis point cut in August and a 50 basis point cut this year.
Some economists see a cut as soon as the next meeting in June and three or more cuts by 2024. That is largely because headline inflation in the UK is forecast to fall significantly in April due to falling energy prices from current 3.2% falling below the BOE’s 2% target, according to some predictions.
“While [economic] Growth is increasing, the labor market continues to loosen. Ultimately, we think that will lead to weaker wage growth. We actually expect that to decline over the course of this year,” Matthew Swannell, a British economist at BNP Paribas, told CNBC’s “Street Signs Europe” on Thursday.
“In addition, we see other costs falling, especially non-labor costs and those related to energy, going through the supply chain and reducing prices of services and goods, ultimately helping the Bank UK goods bring inflation back to 2%.
This is a breaking news story and will be updated shortly.
