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Financial expert warns interest rate cuts unlikely any time soon

9th May 24 9:47 am

A finance expert has warned interest rates are unlikely to be cut in the next few months, as the Bank of England’s Monetary Policy Committee prepares to meet.

A decision on the UK’s interest rate is due to be made on Thursday (9 May) with house owners across the country desperate to see a reduction in the standard rate in the cost of borrowing.

Althea Spinozzi, head of fixed income strategy at Saxo, has said the Bank of England are ‘unlikely’ to announce further cuts soon amid an uncertain landscape as current UK monetary policy decisions are heavily reliant on upcoming data.

Spinozzi has highlighted how there are challenges to early and aggressive BOE rate cuts while core and service inflation remains elevated 4.2% and 6% respectively and wages are still growing 6% year on year.

Althea Spinozzi, Head of Fixed Income Strategy at Saxo, says: “Financial markets are bracing for UK inflation to reach 2% in the second quarter, following comments from Bank of England (BOE) Governor Andrew Bailey indicating a significant anticipated decline in April’s inflation figures. Bailey attributed this expected drop to the UK’s distinctive approach to household energy pricing. Yet, wages and services inflation remain at 6%.

While the BOE is exploring opportunities to begin reducing interest rates, this week’s Monetary Policy Committee (MPC) meeting will likely show that the rate cut cycle ahead remains uncertain.

“The data Bailey referenced will not be released until May 22nd, making it risky to pledge to an aggressive rate cut cycle ahead.

Therefore, even if the Bank of England pre-commits to a rate cut this summer, it is unlikely to announce further cuts soon, especially given the uncertain monetary policy trajectories of the European Central Bank and the Federal Reserve. This leaves UK monetary policy decisions heavily reliant on upcoming economic data.

“At the last MPC meeting, the BOE members decided by an 8-1 majority to maintain interest rates unchanged. In this meeting, it wouldn’t be surprising if the vote split adjusts to 7-2.”

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