BoE holds rates at 5.25%, signals possible June cut
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The news: The Bank of England has held rates at a 16-year high of 5.25% and signalled that it is likely to cut rates over the coming months if inflation continues its downward trajectory.
The numbers: The UK’s inflation rate is currently sitting at 3.2%, above the central bank’s target of 2%. The BoE's Monetary Policy Committee voted by a majority of 7-2 to maintain the bank rate at 5.25%, with two members preferring to reduce the rate by 0.25 percentage points to 5%.
The context: Governor of the central bank, Andrew Bailey, told a press conference following the rates announcement that a rate cut at the BoE’s June Committee meeting was neither “ruled out nor a fait accompli.”
Bailey also explained that the Committee now expects inflationary pressures to ease slightly faster than previously assumed, cutting the CPI forecast to 2.5% in 2024, down from the 2.75% forecast in February.
On the back of the decision, investors priced in a 50% chance of a rate move in June, with markets now expecting 59 basis points of cuts through the remainder of the year.
What they said: Andrew Bailey said: “We’ve had encouraging news on inflation, and we think it will fall close to our 2% target in the next couple of months. We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that thing are moving in the right direction.”
The sources: Bank of England press release, Bloomberg
