(Bloomberg) -- The Bank of England has laid the groundwork for a shift to rate cuts after one of the sharpest turnarounds in guidance in recent memory, with ...
-- The Bank of England has laid the groundwork for a shift to rate cuts after one of the sharpest turnarounds in guidance in recent memory, with data releases, investor bets and the UK’s political calendar pointing to June for the first move.Reddit Soars 48% in Debut as AI Pitch Gets Warm Reception
Following Thursday’s decision to hold rates at 5.25%, financial markets raised their bets for a first cut in June, with an August reduction fully priced, followed by two more this year, taking rates to 4.5% by December. The UK is “on the way” to winning its fight against inflation, though it’s too soon to cut rates now, Bailey told broadcasters Thursday.
If the bank is to cut rates, it needs to do so far enough ahead of the poll to avoid any appearance of political interference. It has raised rates during an election campaign only once since it was given independence in 1997. That was in May 2001, two days after the election was called and after a rate cutting cycle had already begun. An October election this year would suggest campaigning would start in early September.
Two meetings later, no one is voting for higher rates, and one is voting for a cut. A few of the others think rates at 5.25% are having a “material impact” on the underlying domestic inflation that remains the bank’s lingering concern, minutes of the latest meeting showed.“The Bank of England took a big step toward cutting interest rates, at its March meeting. There was a dovish shift in the vote split and an acknowledgment that its policy stance will remain restrictive even if it eases.
Also, about two-thirds of pay deals are agreed by April, and those could provide compelling evidence on whether second-round effects are getting embedded in domestic inflation. Again, that data won’t come until after the May meeting.
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