UK central bank focused on longer-term picture of slowing inflation even as Budget predicted to increase near-term demand
The Bank of England is expected to vote for its second interest rate cut this year despite predictions that Rachel Reeves’ Budget will boost near-term demand, as the UK central bank focuses on a longer-term picture of slowing inflation. The BoE’s Monetary Policy Committee will on Thursday announce its latest interest rate decision, with economists polled by Reuters forecasting a quarter-point reduction in the benchmark rate to 4.75 per cent.
Responding to the figures, Bailey told a conference in Washington, DC, on October 23 that he was seeing a “good story” as inflation slowed more rapidly than he had expected. But Bailey also cautioned that the BoE needed to see continued evidence of decelerating services inflation, given its role as a critical gauge of domestic price pressures. Some economists interpreted his comments as striking a cautionary tone about the prospect of the BoE cutting rates at every meeting from now on.
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