Bank of England keeps policy unchanged but signals rate cuts in the near future

The Bank of England kept its interest rates unchanged at a 16-year high of 5.25%, in its May policy meeting.

The decision was in line with expectations, but today’s MPC 7-2 vote to hold rates vs widely expected 8-1 vote, points to change in view of UK policymakers to the monetary policy and boosts hopes for the first rate cut.

Revived bets of a rate cut after the BoE’s today’s decision impacted markets, with sterling being deflated in immediate reaction.

Governor Bailey said that the central bank would need to cut rates by more than market expected but did neither confirm nor rule out that the start of policy easing, for the first time since March 2020 after the BoE kept rates unchanged for the six straight policy meetings, might be as early as next month.

The UK policymakers said that they will continue to closely watch economic data, to get a clearer picture about inflation, which will play the key role in central bank’s rate decisions in coming months.