The central bank cut its inflation projections for this year, signaling that interest rate cuts will be coming soon. Even so, this Thursday’s meeting ended without changes to the key rates, which remain at 5.25%.
The Bank of England (BoE) kept policy interest rates unchanged this Thursday, in line with market projections, but leaving the likelihood of cuts in the air soon. The central bank sees the inflation indicator on track to return to the 2% objective in the coming months, signaling that the normalization of monetary policy should be imminent.
The BoE maintained policy interest rates at 5.25% for the sixth consecutive meeting, levels that are the highest since 2008, but expressed confidence that “things are moving in the right direction” with regard to the fight against high inflation. The decision was already widely expected by analysts and the market.
The vote reveals two of the nine BoE members favoring immediate cuts, an increase compared to previous meetings, when only one of the members voted for an interest rate cut. On the contrary, none of the nine BoE officials opted for a further increase in policy rates.
In a similar vein, Governor Andrew Bailey’s comments about inflation returning to the 2% target in the coming months were seen as a clear sign that the central bank is preparing to cut rates soon. Markets are currently pointing to summer as the start of the normalization of monetary policy, more specifically June.
This Thursday’s BoE meeting also served to update the bank’s macro projections, which now point to lower inflation – another indication that interest rate cuts are on the horizon. The expectation for the price indicator is now that it will rise slightly in the second half of the year, but only up to 2.5%, that is, below the 2.75% projected in February.
Tags: Bank England signals cuts keeping interest rates unchanged
