Macro Matters
Bank of England moves closer to first rate cut since 2020

By Reuters
May 9, 2024 11:32 AM UTC • Updated ago

By William Schomberg, David Milliken and Suban Abdulla

LONDON, May 9 (Reuters) - The Bank of England took another step towards lowering interest rates, as a second official 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% after Deputy Governor Dave Ramsden joined Swati Dhingra in voting for a cut to 5%. ... Economists polled by Reuters had mostly expected another 8-1 split to keep rates on hold.

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.

The BoE added a line to its post-meeting statement, saying it would be watching the next rounds of economic data closely.
"The Committee will consider forthcoming data releases and how these inform the assessment that the risks for inflation persistence are receding," the BoE said. ... "On that basis, the Committee will keep under review for how long Bank Rate should be maintained at its current level."

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Bank of England Signals Rate Cuts as Inflation Eases
A cut in interest rates could come as soon as this summer as the central bank forecast that inflation would drop to its 2 percent target.


The Bank of England is trying to find the delicate balance between cutting interest rates as inflation slows and not easing too quickly because inflation may not be fully stamped out. Sam Bush for The New York Times

By Eshe Nelson
Reporting from London

May 9, 2024
Updated 9:54 a.m. ET

After a long stretch of high inflation, the Bank of England finally has its 2 percent inflation target firmly within its sights.

The central bank said on Thursday that it expected inflation to reach its target in two years, and then go even lower, a forecast that comes as policymakers inch toward cutting interest rates.

The majority of the bank’s nine-person rate-setting committee voted this week to hold rates at 5.25 percent, the highest since early 2018 and where they have been for nine months. But two members voted to cut rates, compared with just one at the previous meeting in March. And Andrew Bailey, the bank’s governor, added that, although it was too soon to cut interest rates this week, the slowdown in inflation had been “encouraging.”

Inflation has been in line with expectations recently, which is “an indication that we are now getting back to more normal times — at least compared to the highly unusual period we have been living through with a global pandemic and a major war in Europe,” Mr. Bailey said at a news conference.

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