The City of London skyline on March 6, 2024 in London, England.
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LONDON – The Bank of England on Thursday announced after its May meeting that it was widely expected to keep interest rates on hold and said restrictive monetary policy was working to reduce inflation.
Members of the central bank’s Monetary Policy Committee voted 7-2 to remain unchanged, with the latter favoring a rate cut. At the previous meeting, only one member voted for the cuts.
Nonetheless, the Monetary Policy Committee warned that inflation persistence indicators “remain elevated” and highlighted that services sector inflation was 6% in March and that geopolitics presented “upside risks” to the near-term outlook.
The company said it will pay close attention to the upcoming data. Two print copies of the Consumer Price Index will be released before the next meeting on June 20.
The decision keeps the Bank of England’s key bank interest rate at 5.25%.
“We need to see more evidence that inflation will remain low before we can cut interest rates,” Bank of England Governor Andrew Bailey said in a statement reported by Reuters.
“I’m optimistic that things are moving in the right direction.”
Market expectations for interest rate cuts starting in the summer are growing, with money markets fully pricing in the impact of a 25 basis point rate cut in August and an overall 50 basis point rate cut this year.
Some economists expect a rate cut in June and three or more cuts in 2024. The goal.
The Bank of England said in a report released on Thursday that it expects Britain’s gross domestic product to grow by 0.4% in the first quarter of this year and 0.2% in the second quarter. The economy will fall into a shallow recession in the second half of 2023.
At the same time, it expects headline inflation to be close to 2% in the near term and expects inflation to rise slightly later this year as the drag from energy markets fades.
Matthew Swannell, UK economist at BNP Paribas, said: “While (economic) growth continues to accelerate, the labor market continues to be loose. Ultimately, we think this will lead to weaker wage growth. We Wage growth is indeed expected to fall this year.
“In addition, we have also seen other cost reductions, particularly non-labour costs and energy-related costs, lowering the price of services and goods through the supply chain, ultimately helping the Bank of England push inflation back to the 2% mark.”
This is a breaking news story and will be updated soon.
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