Bank of England Sees Economy 'Moving in Right Direction' for Rate Cuts

• Britain's economy is moving in the right direction for the Bank of England to start cutting interest rates, Governor Andrew Bailey said on Thursday as two of his colleagues dropped their votes for a rate hike.
• The BoE's committee of interest rate-setters voted 8-1 to keep borrowing costs at their 16-year high of 5.25% as the two officials who had previously called for higher rates changed their stance.
• British government bonds rallied immediately after the announcement, and the sterling fell against the dollar and the euro.
• Investors slightly increased their bets on interest rate cuts through 2024, with a 76% chance of a first cut in June and a reduction of 75 basis points now fully priced in by December. Bailey said there had been "further encouraging signs that inflation is coming down" but he also said the BoE needed more certainty that price pressures were fully under control.
• "We're not yet at the point where we can cut interest rates, but things are moving in the right direction," he said in a statement. The BoE decision follows the U.S. Federal Reserve's announcement on Wednesday that it remained on track for three interest rate cuts this year, prompting stock market rallies.
• The European Central Bank has tried to cool talk about a run of rate cuts for the eurozone as investors increasingly consider the fight against global inflation to have been won.

(Source: Reuters)