Bank of England maintains interest rates at 5.25% despite inflation concerns
Deputy Governor Dave Ramsden and economist Swati Dhingra voted for a rate cut
Governor Andrew Bailey indicates multiple cuts expected in coming quarters
UK inflation reported at 3.2% higher than consensus forecasts and above BOE's target of 2%
In a highly anticipated decision, the Bank of England has chosen to maintain its interest rates at 5.25% amidst rising inflation concerns. The Monetary Policy Committee voted 7 to 2 to keep rates unchanged, with Deputy Governor Dave Ramsden and economist Swati Dhingra voting in favor of a cut. In a press conference following the decision, Bank of England Governor Andrew Bailey indicated that multiple interest rate cuts are likely over the coming quarters. While markets had previously predicted a more gradual easing in policy, they now expect 59 basis points of cuts through 2024. The decision comes as UK inflation was reported at 3.2%, higher than consensus forecasts and still above the BOE's target of 2%. Inflation concerns have been exacerbated by recent stronger-than-expected inflation and wage data, but Bailey has expressed encouragement in the signs of decreasing inflation due to tighter financial conditions. The UK economy entered a shallow recession in the second half of 2023, but recent figures suggest slight growth in early 2024. Capital Economics predicts that inflation will fall below 2% in April and to 0.5% later this year, shifting the pressure on the BOE to tackle too-low inflation instead.
Are there any external factors, such as geopolitical tensions or supply chain disruptions, that could impact the Bank of England's decision to cut rates?
Is there any indication that inflation will fall below the BOE's target of 2% before multiple rate cuts are implemented?
UK inflation was 3.2% in March, higher than consensus forecasts and still above the BOE’s target of 2%.
Core inflation was 4.2% and services inflation was 6%.
Bailey has stressed that he sees evidence that inflation is coming down due to tighter financial conditions.
Headline rate of price rises is expected to drop considerably in April due to a sharp decline in energy prices.
ECB officials have given a strong signal they will cut rates in June barring a major shock.
The U.K. entered a shallow recession in the second half of 2023 but recent figures have pointed to slight growth in early 2024.
Capital Economics expects inflation to fall below 2% in April and to 0.5% later this year, flipping the pressure on the BOE to tackle too-low inflation instead.
Accuracy
]The Bank of England is expected to hold interest rates steady at its Thursday meeting.[
Bank of England Governor Andrew Bailey is speaking at a press conference.
