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Bank of England likely to move closer to first rate cut since 2020

Bank of England moves closer to rate cut

The Bank of England is poised to take a further stride toward its first interest rate cut in four years on Thursday, driven by a dip in inflation. However, it’s likely to tread cautiously in indicating an imminent move. Anticipated to maintain its benchmark Bank Rate at 5.25%, the highest since 2008, the central bank is expected to uphold this stance for the sixth consecutive meeting following its May monetary policy deliberations.

The key question for investors revolves around whether the BoE hints at a potential cut in June, aligning with the European Central Bank’s signaled intention to reduce borrowing costs, or opts for a stance akin to the U.S. Federal Reserve, preferring to wait longer before making such a move.

“We advocate for continued prudence,” remarked Paula Bejarano Carbo, an economist at the National Institute of Economic and Social Research, pointing to ongoing robust wage growth in Britain’s constricted labor market and lingering uncertainty surrounding conflicts in the Middle East.

Financial markets are presently pricing in the likelihood of an initial quarter-point rate reduction by the Bank of England in August, followed by another in either November or December, thereby bringing the Bank Rate down to 4.75%. Subsequently, projections suggest further cuts throughout 2025.

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