The Bank of England (BoE) met expectations on Thursday and kept interest rates on hold at 5% after the first rate cut of the cycle at its August meeting, when it cut rates for the first time in four from 5.25%. The UK’s central bank He thus maintains his scenario and does not let himself be carried away by the wave. which led the Fed to decide on Wednesday to proceed with a sharp rate cut of 50 basis points, which is putting some pressure on its counterparts in advanced economies.
The BoE not only sent the message that it would maintain its hours. It also telegraphed a clear unanimity in the decision, Eight members of the Monetary Policy Committee (MPC) voting in favour of the break and only one asking for a new cut. This vote gives off a more warmonger as analysts predict a 7-2 vote and risks tilt toward a more conciliatory or accommodating vote of 6-3.
The publication of August CPI Wednesday led investors to consider lower odds of a rate cut in September, although a pause was already expected for Thursday. UK headline CPI was flat last month at 2.2% year-on-year in July, although the underlying index accelerated from 3.3% to 3.6%, in line with expectations. An 11.6% annual increase in airfares provided a major boost to core CPI, while offsetting contributions from food and alcohol led to a flat headline figure.
“The rise of CPI in August This is consistent with the BoE’s forecast of an acceleration in inflation in the near term. Labour market dynamics continue to hold up, with the unemployment rate falling to 4.1% in July, and “The slowdown in wage growth has so far not been enough to moderate inflationary pressures in the services sector,” explain analysts at BCA Research. However, they specify, “the central bank expects that Disinflationary pressures dominate beyond the short termwhich will lead to further rate cuts.
“He “glucose spike” The economic crisis linked to the pandemic has already faded and recent events reinforce our conviction that inflation will continue to fall. The United Kingdom is no exception to this trend. Growth in the wages in the UK is also down to 4%, indicating a more favourable environment for future rate cuts,” Pimco analysts agree.
However, according to BCA Research, persistent services inflation means the BoE is likely to ease your monetary policy slower than their counterparts advanced economies, particularly the ECB.
