Bank of England leaves rates unchanged
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The news: The Bank of England has left rates unchanged for the fifth consecutive meeting, and has signalled that it is moving closer toward cutting borrowing costs.
The numbers: The central bank left rates at 5.25%, with a majority 8-1 voting to maintain the bank rate at its 16-year high.
The context: BoE governor Andrew Bailey said that as things are “moving in the right direction” on inflation, after data in recent weeks showed encouraging signs that inflation is continuing to move down toward the BoE’s 2% target. The central bank expects inflation to fall below its target rate during Q2 this year, and that even after rates are cut they will remain high enough to ward off inflation.
Traders in swaps markets have fully priced in three 0.25 percentage point cuts for the year, putting the likelihood that they would begin by June at 73%. The FTSE 100 climbed 1.8% on the news, pushing the UK index to its highest level since May 2023.
The decision comes on the heels of the US Federal Reserve’s decision to hold rates steady on Wednesday, and signalling its intentions to make a trio of cuts during the remainder of the year.
On the decision, Bloomberg economists said: “May still looks too early for the first move, though the outcome of the March decision suggests the next meeting is likely to be ‘live’. Our view is that the first cut will come in June.”
The sources: Financial Times, Bank of England, Capital Brief
