Bank of England adopts gradual approach, halts rate cuts
The Bank of England announced on Thursday that it would maintain Interest rates following a previous cut in August, despite the U.S. Federal Reserve’s recent rate reduction. The Monetary Policy Committee voted 8 to 1 to hold rates, with one member advocating for another cut. The committee cited “elevated” services Inflation and expected the U.K. economy to pick up momentum in the second half of the year.
The decision to keep rates steady was influenced by a mix of data, including near-target headline Inflation, rising services prices, and cooling wage growth. The British pound strengthened against the U.S. dollar following the announcements from the BOE and Fed, while global equity markets saw a boost.
Additionally, the BOE revealed plans to reduce its stock of bonds by £100 billion over the next year through sales and maturing bonds. This decision was in line with previous actions as the Central bank continues its quantitative tightening program. Despite incurring losses on the QT program, the BOE Governor emphasized the importance of creating space for future monetary operations.
The BOE’s choices were made independently of the Federal Reserve’s rate cuts, with analysts predicting a potential rate cut in November. While the BOE maintained a cautious stance, there are expectations for further rate adjustments in the upcoming months to address Inflation concerns and support economic growth.
Overall, the BOE’s decision to hold rates and continue with its QT program reflects a balancing act between economic factors and the need for future policy flexibility. The upcoming budget announcement by the U.K. government will also play a role in navigating the country’s fiscal landscape.
SOURCE
Lucas Bennett, completed his Finance degree at Bocconi University in Italy in 2018. He is highly skilled in corporate finance and risk management, beginning his career at a hedge fund in Milan. Lucas expertise extends to consulting for leading European firms, particularly within the energy markets sector. His analytical skills and strategic mindset have made him a sought-after consultant, and he continues to explore new opportunities within the financial services industry across Europe.