The Bank of England keeps rates unchanged in line with expectations
The Bank of England (BoE) decided to maintain its main interest rate at 5.25%, a 16-year high, just ahead of the July 4 election.
This decision, made by a 7-2 vote from the Monetary Policy Committee (MPC), aligns with economists’ predictions. BoE Governor Andrew Bailey emphasized that, although the latest data showing inflation at the 2% target is positive, it is premature to reduce rates.
The central bank seeks more consistent evidence of low inflation before easing monetary policy.
Following the announcement, the British pound weakened against the US dollar, indicating market anticipation of an earlier rate cut, with probability of a quarter-point cut by the September meeting increased after today’s BoE’s decision.
This BoE decision contrasts with the European Central Bank’s recent rate cut and the market’s expectation that the US Federal Reserve will not lower borrowing costs until later this year. While many economists predict a rate cut at the BoE’s next policy meeting in August, they acknowledge that future actions will heavily depend on upcoming economic data.
The timing of any rate cut is likely to be politically significant. Prime Minister Rishi Sunak’s Conservative Party is currently trailing the opposition Labour Party by about 20 points in pre-election polls. Sunak has attempted to take credit for the reduction in inflation since he took office, but Labour attributes the high mortgage rates to economic mismanagement