The Bank of England kept its main interest rate unchanged at a 16-year high of 5.25% on Thursday even though inflation continues to drop from multi-decade peaks.
A woman walks in front of the Bank of England, at the financial district in London, on March 23, 2023. The Bank of England is widely expected to indicate Thursday March 21, 2024 that interest rates could be cut in …LONDON —
Market expectations that lower U.K. interest rates were on the horizon got a boost Wednesday with news that inflation fell to a 2.5-year low of 3.4% in February - more than anticipated - and is now not far off the Bank of England’s target rate of 2%. Bank Gov. Andrew Bailey said there have been “further encouraging signs” that inflation is coming down but that more evidence was needed “to be sure” that inflation will fall to target and stay there.
“With wage growth still elevated and underlying inflation pressures likely to pull inflation higher again in the second half of the year, we think we are still a few months away from the first rate cut,” said Luke Bartholomew, senior economist at asset management firm abrdn. “However, once cuts start, ongoing economic weakness could see rates fall quite materially over the next few years.”
The British economy has barely grown over the past year and growth this year is expected to be fairly muted.
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