The Bank of England took another step towards lowering interest rates, as a second official backed a cut and Governor Andrew Bailey said he was “optimistic that things are moving in the right direction.”
The BoE added a line to its post-meeting statement, saying it would be watching the next rounds of economic data closely. Over a nearly two-year period from late 2021, the BoE – like other central banks – pushed up borrowing costs to tackle a surge in inflation which peaked at 11.1 per cent in October 2022.
Investors have been trying to work out whether the BoE is likely to cut rates in June – when the European Central Bank has already signalled it will reduce borrowing costs – or, like the U.S. Federal Reserve, will hold out for longer.Shortly before the BoE’s announcement on Thursday, financial markets were close to fully pricing a first quarter-point BoE rate cut only in August and another in November or December taking Bank Rate to 4.75 per cent, followed by more cuts in 2025.
Minutes of the BoE’s May meeting showed differences between the seven MPC members who voted to keep rates on hold around how persistent inflation pressures would be, and how much more evidence of a slowdown was needed to justify a rate cut.
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