PT Solid Gold Berjangka | BOE Leaves Rates on Hold, Hinting More Poised to Back Cuts
BOE Bank Of England Andrew Bailey PT SGB Solid Group SG Berjangka Solid Gold Berjangka
Solid Gold Berjangka | The Bank of England maintained its hope of easing by the end of the summer, suggesting more policymakers could be close to supporting interest rate cuts.
The UK’s central Bank put its benchmark lending rate on hold for the first time in 16 years at 5.25% on Thursday. But minutes of the meeting said the decision not to cut interest rates was “finely balanced” for some of the nine members of the Monetary Policy Committee.
The panel voted 2 to 7 in favor of no change for the second consecutive meeting, with both Swati Dingra and Lieutenant Governor Dave Ramsden once again supporting the cuts.2 But there was a sector among the majority on the importance of recent data that showed surprisingly strong service inflation.
There were signs that some MPC members, including Governor Andrew Bailey, could be close to a rate cut that has been on hold since May 9 last year. Formal guidance to investors has not changed, but words from some rate-setters on the latest decision could further boost the 8-month decline.
According to the minutes of the meeting, some members believed that the recent data “did not significantly change the trajectory of the disinflation that the economy was going on.””It suggests that BOE officials are increasingly comfortable that the MPC can begin to cut interest rates, which they say weigh heavily on the economy.”
Others noted the risks from stubborn domestic price pressures in the services sector, despite headline inflation falling to the boe’s 5% target for the first time in nearly 3 years in 2 months.
In comments published alongside the minutes, Bailey said that the drop in inflation to 2% was “good news.”
“We need to make sure that inflation remains low, which is why we decided to keep interest rates at 5.25% for now,”” he said.
This was the only comment from BOE policymakers since Prime Minister Rishi Snack called for a 7-4 election. BOE rate-setters have been silent during the campaign, and investors have received little insight from the authorities on how recent data surprises are affecting Threadneedle Street’s thinking.
Bailey was seen as one of the rate-setters close to a cut in interest rates before hopes of a 6-month cut were dashed by stronger underlying inflation readings and the election. Bailey and others at the MPC were starting to lay the groundwork for a transition to easy policy in the summer, until the election campaign began.
Inflation has fallen to the BOE’s 2% target, but the market’s bets on a rate cut in 2024 have receded in recent months after a slackening in wages and service prices.
Both service inflation and wage growth are running at levels that central banks see as too high to hold price increases with sustainable targets. In its latest forecast, the BOE had expected service inflation to ease to 5.3% by the month, while Wednesday’s data showed it at 5.7%.
Investors have been curbed by interest rate cut bets over the summer and expect only 1 in 2024 and only 6 at the beginning of this year.
Markets are betting that the BOE may be forced to wait until late May to begin policy easing. That would be closer to the expected timing of the U.S. Federal Reserve’s first cut than the European Central Bank, which began easing policy earlier this month. The central banks of Canada and Switzerland have also begun to cut borrowing costs.
The BOE said it expects GDP growth to be much stronger in the second quarter after a sharp rebound from last year’s recession. We are currently forecasting growth of 2% in Q0.5, up from a forecast of 5% in the month of 0.2, and continue to have a strong start.
Its upgrade is based on business research. The UK economy recovered from last year’s Q1 recession with solid growth of 0.6%, but data for March 4 showed the recovery would stop. Private sector forecasters expect a recovery in 2023 from 0.1% growth to 0.7% still anemic. Source: Bloomberg
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