The Bank of England has chosen to maintain a 5.25 per cent interest rate, even with increasing signs that inflation is well-managed. However, indications show that a potential drop in rates may occur in the upcoming summer months.
On Thursday, the decision to hold this benchmark rate was made by the bank’s monetary policy committee, meeting the predictions made by economists. Since August of last year, the rate has remained at 5.25 per cent.
Seven committee members decided to hold the rates, whereas Deputy governor Dave Ramsden and external member Swati Dhingra, who previously championed a decrease in March, voted for an immediate reduction in the cost of borrowing.
According to a Reuters’ poll, economists forecasted a single vote in favor of a reduction. Andrew Bailey, the governor of the bank, sided with the majority in maintaining the current policy, however, he indicated potential for a decrease in the upcoming June MPC meeting.
Bailey acknowledged that recent achievements in inflation control have been positive and predicted that it would approach the bank’s 2 per cent target within a few months, but asserted that the Bank of England isn’t preparing to take action just yet.
The British pound saw a 0.3 per cent drop in value against the dollar, bringing it to $1.2462, as the bank suggested it may be leaning towards relaxing its policy. The UK’s two-year gilt yields, which are influenced by the interest rate, slightly fell by 0.02 percentage points, down to 4.29 per cent.
Amid increasing anticipation of summer rate cuts, the FTSE 100 index, which showcases top-tier stocks, has seen a slight increase of 0.4 per cent. UK’s inflation rates showed a decrease in March, dropping from 3.4 per cent to 3.2 per cent, however, this remains above the 2 per cent target. –Copyright The Financial Times Limited 2024