LONDON, May 1 (Reuters) – The Bank of England must decide next week whether to update its message about when it might cut interest rates for the first time in four years, a move which could yet prove risky despite a sharp drop in inflation.
Britain’s labour market is still generating inflationary heat, the economy looks like it has emerged from a recession and the U.S. Federal Reserve – which sets the tone for financial markets globally – is pushing back on when it might cut rates. Financial markets are now only fully pricing in a first BoE rate cut in September and the chances of a second move by the end of the year are seen as little more than 50-50. In recent months BoE Governor Andrew Bailey has sounded comfortable with the idea of cutting borrowing costs for the first time since early 2020 when the COVID crisis struck.
He says price pressures in Britain are moving in the right direction – consumer price inflation stood at 3.2% in March and is expected to fall again in April, moving further away from the four-decade high of 11.1% set in October 2022.
In March, Bailey said it was reasonable for investors to bet on rate cuts this year and one BoE official, Swati Dhingra, voted for a cut in February and March. last month showed a split in expectations between June and later in the summer or September. But several top BoE officials have sounded cautious about an early move, stressing how wage growth of around 6% is too strong to get inflation down to 2% sustainably. The difference in views means only minor changes to the central bank’s message are likely on May 9 after the latest meeting of the BoE’s Monetary Policy Committee…
Deputy Governor Dave Ramsden struck a dovish note on April 19 when he said the risk of inflation getting stuck too high had receded and it might prove weaker than the BoE’s forecasts. But Chief Economist Huw Pill said on April 23 that rate cuts remained some way off, echoing external MPC member Jonathan Haskel. Megan Greene has said wage growth is too high to be consistent with the BoE’s 2% target. Bailey and other top officials will hold a news conference at 1130 GMT on May 9, half an hour after publication of their latest monetary policy decision, minutes of their meeting and their latest forecasts. (Writing by William Schomberg; Editing by Toby Chopra)
Bank of England Faces Decision on Interest Rate Cut Amid Inflation Concerns, UK
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