Reported 8 months ago
Despite the UK inflation rate dropping to the 2% target, the Bank of England maintained the benchmark interest rate at a 16-year high of 5.25% for the seventh consecutive time after its meeting on June 20. However, signaling dovishness, the BoE hinted at more policymakers being open to easing policies. Market reactions showed traders betting on an August rate cut probability rising from 32% to over 50%. The BoE's Monetary Policy Committee voted 7-2 to keep rates unchanged, with Vice-Chair Ramsden and external member Dhingra favoring a cut to 5%. Governor Bailey explained that while recent data showed inflation hitting targets, it was still too early for a rate cut, emphasizing the need to ensure inflation remains low. Factors indicating a rate cut might be near include easing service industry inflation and wage growth slowing since the previous meeting. Economists polled by Reuters last week expect the BoE to start reducing rates in August, with the BoE noting achieved inflation targets, easing short-term inflation expectations, and wage growth slowdown. However, uncertainties in labor market activity make it challenging to evaluate. The Bank also underscored the need for restrictive monetary policies to be maintained sufficiently long to sustainably return inflation to the target level of 2% in the medium term. It raised the GDP growth forecast in the second quarter from 0.2% to 0.5% and expects a slight rise in the Consumer Price Index in the second half of the year, mainly due to energy prices providing inflation support.
Source: YAHOO