Bank Of England To Trim Bank Rate On Aug 1 And Once More This Year

• The Bank of England (BoE) will trim the Bank’s Rate to 5% next week, a majority of economists said in a Reuters poll, and with inflation expected to hover around target, it will embark on a slow and steady reduction path with one more cut this year.
• However, markets are only pricing in around a 45% chance of a cut and several economists declined to say whether the first cut would come in August or September.
• Bank Rate has been at a 16-year high of 5.25% since last August. The BoE was one of the first central banks to start raising borrowing costs after the COVID-19 pandemic and, like its peers, is now looking at easing the policy.
• In June, the rate-setting Monetary Policy Committee voted 7-2 to leave Bank Rate on hold, but some members said their thinking was now "finely balanced". An August cut would put the BoE ahead of the U.S. Federal Reserve, which is expected to wait until September, but behind the European Central Bank, which made its first cut in June and although it paused this month, it said September was "wide open".
• Following August's trim, the Bank will pause in September before cutting 25 basis points in November to put Bank Rate at 4.75%, median forecasts showed. It will take another breather in December. However, it will be a similar slow and steady pace next year with 25 basis point cuts in the first and second quarters, 50 in the third, and 25 in the fourth, to put Bank Rate at 3.50% by end-2025
• The path for growth will also be steady - the economy was predicted to expand 0.3% each quarter through to the end of 2025. Across this year, GDP growth will pick up 0.8% before an acceleration to 1.3% next year, a touch faster than expected in June.

(Source: Reuters)