Bank of England Rate Cut – Currency Thoughts

Bank of England Rate Cut

August 1, 2024

Although expected by many economists, the Bank of England’s 25-basis point Bank Rate decline to 5.0% embodied a surprisingly slim voting majority that included Governor Bailey. But four of the nine members of the monetary policy committee, including the chief economist Huw Pill, favored not yet reducing the cyclical high of 5.25% that had been maintained since last September. The minority’s concern involves still-elevated service sector price pressures and concern over the second-order inflation risk that such pose. Also, recent growth in the U.K. has exceeded expectations. Although a majority was fashioned to cut the interest rate, the whole committee widely supports proceeding with considerable caution when considering follow-up rate reductions. CPI inflation of 2.0% has now touched down to target but is projected to rise later this year somewhat past 2.5% and energy-related base rate effects drop out of year-on-year price comparisons.

Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Bank of England

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