Bank of England close to first rate cut since 2020
The Bank of England took another step towards lowering interest rates, as a second ocial backed a cut and Governor Andrew Bailey said he was “optimistic that things are moving in the right direction”.
The BoE said on Thursday its Monetary Policy Committee voted 7-2 to keep rates at a 16-year high of 5.25 per cent after Deputy Governor Dave Ramsden
The rate cut, a potential boost for Prime Minister Rishi Sunak could come as soon as MPC’s next meeting in June
joined Swati Dhingra in voting for a cut to 5 per cent. Economists polled by Reuters had mostly expected another 8-1 split to keep rates on hold. Sterling dropped against the dollar and the euro after the announcement while British government bond yields fell sharply as investors added to their bets on the BoE rate cuts ahead.
BOOST FOR SUNAK
The MPC has now kept rates on hold at six meetings in a row but it hinted that a first cut since March 2020 at the onset of the Covid-19 pandemic could come as soon as its next meeting in June, a potential boost for Prime Minister Rishi Sunak. He has told voters that the economy is turning a corner but is struggling to reduce the opposition Labour Party’s big opinion poll lead before an election later this year. Over a nearly two-year period from late 2021, the BoE - like other central banks - pushed up borrowing costs to tackle a surge in inflation which peaked at 11.1 per cent in October 2022. Since then, headline inflation has fallen back and the BoE expects it slowed to around its 2 per cent target in April, largely because of falling energy prices.