Bank of England: Adopting a cautious attitude towards additional interest rate cuts
2024-08-05
■ The Bank of England (BOE) has lowered its policy rate by 0.25%, but the decision to cut rates has been narrowly passed
■ Although the inflation rate has reached the Bank of China's target, considering the accelerated growth in the second half of the year, the pace of interest rate cuts will slow down
On August 1st, the Bank of England (BOE) lowered its policy interest rate by 0.25 to 5.00%. This interest rate cut aligns with market expectations and is the first in four years and five months. However, with the easing of inflationary pressure, the policy committee's opinion was narrowly passed by a 5-4 margin. Bank of England Governor Bailey stated: 'It is necessary to confirm that inflation remains at a low level and to avoid premature or excessive interest rate cuts,' and indicated a cautious stance towards the future. The meeting minutes pointed out that for some members, the decision to cut interest rates was a "delicate balance," which remained unchanged from the statement made in June (when the interest rate was decided to remain unchanged by a 7-2 vote). The committee members who support the interest rate cut this time include Vice Governor Ramsden and Committee member Dhingra, who also supported it last time. In addition, five new members have been added, including Governor Bailey, Vice Governor Breeden, and Vice Governor Lombardelli.
The growth rate of the UK Consumer Price Index (CPI) slowed to 2.0% year-on-year for two consecutive months in May and June, meeting the target of the Bank of China. In the financial policy overview released at this meeting, it is expected that as the impact of last year's energy price decline weakens, the CPI growth rate will accelerate to 2.75% in the second half of the year. The meeting also stated that it is necessary to maintain a tight financial environment for a considerable period until the risk of inflation continuing to rise to the 2% target in the medium term is further alleviated. The committee will closely monitor the ongoing inflation risk and pay attention to employment conditions such as high service prices and wage growth. The additional interest rate cut is expected to be decided at the committee meeting in November or December, and the year-end policy rate will be lowered to 4.75%.
■ Although the inflation rate has reached the Bank of China's target, considering the accelerated growth in the second half of the year, the pace of interest rate cuts will slow down
On August 1st, the Bank of England (BOE) lowered its policy interest rate by 0.25 to 5.00%. This interest rate cut aligns with market expectations and is the first in four years and five months. However, with the easing of inflationary pressure, the policy committee's opinion was narrowly passed by a 5-4 margin. Bank of England Governor Bailey stated: 'It is necessary to confirm that inflation remains at a low level and to avoid premature or excessive interest rate cuts,' and indicated a cautious stance towards the future. The meeting minutes pointed out that for some members, the decision to cut interest rates was a "delicate balance," which remained unchanged from the statement made in June (when the interest rate was decided to remain unchanged by a 7-2 vote). The committee members who support the interest rate cut this time include Vice Governor Ramsden and Committee member Dhingra, who also supported it last time. In addition, five new members have been added, including Governor Bailey, Vice Governor Breeden, and Vice Governor Lombardelli.
The growth rate of the UK Consumer Price Index (CPI) slowed to 2.0% year-on-year for two consecutive months in May and June, meeting the target of the Bank of China. In the financial policy overview released at this meeting, it is expected that as the impact of last year's energy price decline weakens, the CPI growth rate will accelerate to 2.75% in the second half of the year. The meeting also stated that it is necessary to maintain a tight financial environment for a considerable period until the risk of inflation continuing to rise to the 2% target in the medium term is further alleviated. The committee will closely monitor the ongoing inflation risk and pay attention to employment conditions such as high service prices and wage growth. The additional interest rate cut is expected to be decided at the committee meeting in November or December, and the year-end policy rate will be lowered to 4.75%.