20 June: Market Eyes August For Possible Cut To 5%
The Bank of England has kept borrowing costs at a 16-year high of 5.25%, the seventh occasion since August last year that it has left the Bank Rate unchanged, writes Andrew Michael.
Today’s announcement saw the Bank’s Monetary Policy Committee (MPC) decide by seven votes to two to maintain the Bank Rate at its present level. The two dissenting votes were each in favour of a quarter of a percentage point rate reduction.
The Bank’s announcement echoes a recent decision by the US Federal Reserve, which also continued to keep borrowing costs on hold.
Explaining today’s decision, Sir Andrew Bailey, Bank of England governor, said: “We need to be sure that inflation will stay low and that’s why we’ve decided to hold rates at 5.25% for now.”
The MPC said it would “continue to monitor closely indications of persistent inflationary pressures and resilience in the economy as whole, including a range of measures of the underlying tightness of labour market conditions, wage growth and services price inflation”.
The next Bank Rate announcement is due on 1 August, when the belief is that it may fall to 5%, although there are suggestions the Bank might wait to see if there is any economic fall-out from the General Election on 4 July.
The Bank of England, the Fed and the European Central Bank (ECB), along with a number of other leading central banks, are required to keep inflation at…
