June Bank of England preview: Policy interest rates expected to remain unchanged
2024-06-17
■ Regarding financial markets, expectations of interest rate cuts have increased after the summer due to factors such as the announcement of a general election by the UK Prime Minister and speeches by senior BOE officials.
■ Our bank has predicted that interest rates will decrease from July to September, but we are still observing the internal discussions and other developments within BOE.
The Bank of England (BOE) is gearing up for a significant event- the announcement of the results of the Monetary Policy Committee (MPC) on June 20th. This meeting is crucial as it will determine the policy interest rate, which the market expects to remain at 5.25%, marking the seventh consecutive meeting. The European Central Bank (ECB) set the stage for the first action of monetary easing policy in the European region by cutting interest rates in June. Despite BOE's indications in March and May that it would move towards a rate cut, the market thinks it may not start until after August.
Since the MPC in May, the main factors influencing factors have been the announcement of the UK Prime Minister's election, speeches by senior BOE officials, and the Consumer Price Index (CPI). In particular, on May 22nd, the British Prime Minister announced a general election with a voting day set for July 4th, which may not be a good time for the BOE to announce policy adjustments in June. In addition, since the MPC in May, members who support maintaining policy interest rates unchanged, such as Pill, Greene, and BOE Vice President Brodbent, have expressed a cautious attitude towards rate cuts but also hinted at the possibility of summer rate cuts. In addition, the April CPI released on May 22 showed an overall increase of 2.3% compared to last year, the lowest level since July 2017. However, BOE's focus on the service price increase rate was 5.9%, exceeding BOE's expected 5.5%. Although the May CPI data will be released before the MPC in June, the BOE is currently not in a hurry to implement interest rate cuts, which is a clear judgment.
At the May MPC, we were initially expected to start cutting interest rates in June. Still, due to the factors above, we have postponed our expectation of the start date of the rate cut to July-September. BOE's confirmation of a cautious attitude towards early interest rate cuts exceeded initial expectations. Nevertheless, we still maintain a pace of quarterly interest rate cuts. Since the beginning of this year, economic indicators in the UK have shown that the economy is recovering from the recession in the second half of last year. Although the monthly GDP in April showed zero growth due to adverse weather conditions, it did not lead to BOE's eagerness to cut interest rates. In June, the MPC will confirm the clue of the start time of interest rate cuts and pay special attention to the movements of Chairman Pill, who also serves as Chief Economist. In the May MPC, 2 out of 9 members supported interest rate cuts, namely BOE Vice President Ramsden and member Dinghra.
■ Our bank has predicted that interest rates will decrease from July to September, but we are still observing the internal discussions and other developments within BOE.
The Bank of England (BOE) is gearing up for a significant event- the announcement of the results of the Monetary Policy Committee (MPC) on June 20th. This meeting is crucial as it will determine the policy interest rate, which the market expects to remain at 5.25%, marking the seventh consecutive meeting. The European Central Bank (ECB) set the stage for the first action of monetary easing policy in the European region by cutting interest rates in June. Despite BOE's indications in March and May that it would move towards a rate cut, the market thinks it may not start until after August.
Since the MPC in May, the main factors influencing factors have been the announcement of the UK Prime Minister's election, speeches by senior BOE officials, and the Consumer Price Index (CPI). In particular, on May 22nd, the British Prime Minister announced a general election with a voting day set for July 4th, which may not be a good time for the BOE to announce policy adjustments in June. In addition, since the MPC in May, members who support maintaining policy interest rates unchanged, such as Pill, Greene, and BOE Vice President Brodbent, have expressed a cautious attitude towards rate cuts but also hinted at the possibility of summer rate cuts. In addition, the April CPI released on May 22 showed an overall increase of 2.3% compared to last year, the lowest level since July 2017. However, BOE's focus on the service price increase rate was 5.9%, exceeding BOE's expected 5.5%. Although the May CPI data will be released before the MPC in June, the BOE is currently not in a hurry to implement interest rate cuts, which is a clear judgment.
At the May MPC, we were initially expected to start cutting interest rates in June. Still, due to the factors above, we have postponed our expectation of the start date of the rate cut to July-September. BOE's confirmation of a cautious attitude towards early interest rate cuts exceeded initial expectations. Nevertheless, we still maintain a pace of quarterly interest rate cuts. Since the beginning of this year, economic indicators in the UK have shown that the economy is recovering from the recession in the second half of last year. Although the monthly GDP in April showed zero growth due to adverse weather conditions, it did not lead to BOE's eagerness to cut interest rates. In June, the MPC will confirm the clue of the start time of interest rate cuts and pay special attention to the movements of Chairman Pill, who also serves as Chief Economist. In the May MPC, 2 out of 9 members supported interest rate cuts, namely BOE Vice President Ramsden and member Dinghra.