Bank of England expected to cut interest rates from 16-year high | Wilnesh News

Wage growth is an issue repeatedly emphasized by the Bank of England and the new British government announcement David Muir, an economist at Moody’s Analytics, told CNBC via email that above-inflation public sector wage increases this week may not help.

“For the hawks on the (monetary policy) committee, concerns about uncomfortably high levels of wage growth are likely to be heightened following the government’s recent decision to give public sector workers a big pay rise. But even if interest rates continue to remain low Change, this month, we expect most will cut interest rates ahead of the September meeting, when it will become more apparent that risks to upward inflation are receding.

Labor came to power in early July after defeating the Conservatives in an election.

—Jenny Reed

Goldman Sachs’ chief European economist said on Thursday that a Bank of England monetary policy decision was “closer” while suggesting a rate cut might win.

Jerry Stern said policymakers will likely “look past” volatile services inflation and focus instead on the underlying progress of the economy.

“We think when you look at the totality of this data, that’s probably enough to make them cut. But, as you said, it’s going to be very close because it kind of depends on where you look at the data,” he said. told CNBC’s “Squawk Box Europe.”

— Karen Gilchrist

The Bank of England’s Monetary Policy Committee consists of nine members who vote on setting the key Bank Rate – Governor Andrew Bailey, Chief Economist Hugh Peel, three deputy governors (Sarah Breeden, Claire Lombardelli and Dave Lumsden) and four external members appointed by the UK to the Treasury (Meghan Green, Swati Dhingra, Jonathan Haskell and Katherine Mann).

As with any rate-setting committee, there are more hawkish members — such as Haskell, who said in a recent speech that he thinks more evidence of deflation is needed before lowering rates — and more doves. Members such as Dhingra and Lumsden, who had voted for a rate cut at the recent meeting.

“We expect a 6-3 vote in favor of a rate cut on Thursday,” ING analysts said in a note earlier this week.

“Two members voted for a rate cut in June, and it looks like at least two and maybe three outside members are very reluctant to cut at the moment. That leaves four or five members in the middle, who history shows tend to act as a group .

“In other words, don’t just look at June’s 7-2 decision to keep rates unchanged and assume that means we won’t get majority support for a rate cut this week,” they said.

—Jenny Reed

Before the ECB cut interest rates in early June, policymakers spent weeks making their intentions clear in speeches and interviews.

Although they will have to read between the lines more, traders are now almost certain that the Fed will begin its own path of rate cuts in September.

However, just hours before the Bank of England’s August meeting, market pricing had dropped to 55%, before rising to around 61% – a decision that analysts lacked confidence in.

One of the reasons for the Bank of England’s uncertainty and relative lack of strong signals is the divisions among its voting Monetary Policy Committee members.

The Monetary Policy Committee described its decision to hold interest rates in June as a “delicate balancing act”, with some members worried about wage growth and rising services sector inflation, while others were more concerned about the broader deflationary trajectory.

Another factor is For those trying to speculate on its next move in limiting central bank communications during the six weeks between May 23 and July 4, when the UK holds a general election – including during the June 20 meeting – this puts things into perspective. It gets even more confusing.

Read more here.

—Jenny Reed