• Investing
  • Stock
  • Editor’s Pick
  • Economy
The Significant Deals
Editor's Pick

Bank of England splits on rates outlook as it keeps borrowing costs on hold

by December 19, 2024
written by December 19, 2024

By David Milliken and Suban Abdulla

LONDON (Reuters) -Bank of England policymakers split over whether to cut interest rates on Thursday with more officials than expected seeking to help the slowing economy with lower borrowing costs despite lingering inflation pressure.

The BoE kept its benchmark Bank Rate on hold at 4.75% – as widely expected – but three of the Monetary Policy Committee’s nine members voted to cut them to 4.5%: Deputy Governor Dave Ramsden and external members Swati Dhingra and Alan Taylor.

Economists polled by Reuters had expected only one MPC member to vote for a cut. Sterling fell by a third of a cent against the U.S. dollar after the decision was announced.

Governor Andrew Bailey said the central bank needed to stick to its existing “gradual approach” to cutting rates.

“With the heightened uncertainty in the economy we can’t commit to when or by how much we will cut rates in the coming year,” he said.

Economists polled by Reuters last week forecast the BoE would cut rates four times next year. But financial markets have scaled back their expectations sharply in response to faster-than-expected wage growth and only see up to two cuts.

Interest rate-sensitive British two-year government bond yields fell sharply before partially recovering to stand around 2 basis points lower than before the decision.

Interest rate futures priced in less of a chance of a rate cut in the immediate future – down to a one-in-three possibility at the BoE’s next meeting in February from two-in-five earlier. Expectations for 2025 as a whole were little changed.

“The MPC’s ability to ease interest rates next year will be constrained by the challenging inflation backdrop,” Yael Selfin, chief economist at KPMG UK, said.

“This will put the BoE in a unique position relative to its counterparts in Europe, particularly the ECB, where a weakening growth outlook increases the urgency to cut rates,” she added.

But Suren Thiru, economics director at accountancy body ICAEW, said there were signs the BoE could move more quickly.

“The split vote decision and the dovish tone of the minutes suggest that a February interest rate cut remains very much in play, if not yet a done deal,” he said.

SLOWER RATE CUTS

The BoE has already been less willing to cut rates than either the U.S. Federal Reserve or the European Central Bank, reducing rates by just half a percentage point this year.

Official figures on Wednesday showed British consumer price inflation rose to 2.6% in November – the highest in the Group of Seven rich economies by a small margin, and slightly higher than the BoE itself had forecast last month.

“Headline inflation is expected to continue to rise slightly in the near term,” the BoE said.

However, the central bank also cut its growth forecast for the final quarter of this year to zero from a 0.3% forecast just six weeks ago.

Britain’s economy contracted in September and October – the first back-to-back monthly falls in output since 2020 – according to official data last week and business sentiment has tumbled since finance minister Rachel Reeves announced a 25 billion pound tax hike for employers in her Oct. 30 budget.

MPC members who backed keeping rates on hold said it remained “particularly uncertain” whether these higher costs would be passed on to consumers through higher prices or lead to job losses and slower pay growth.

“Recent developments added to the argument for a gradual approach to the withdrawal of policy restrictiveness, while eschewing any commitment to changing policy at a specific meeting,” they said.

The three MPC members who voted to cut rates said a “very restrictive” policy stance risked pushing inflation too far below its 2% target in the medium term and creating an unduly large amount of spare capacity in the economy.

This post appeared first on investing.com
0 comment
0
FacebookTwitterPinterestEmail

previous post
Big year of central bank easing wraps up with dovish BoE, Fed caution
next post
Deutsche Bank reacts to BoE’s cautious rate cut to 4.75%

You may also like

China central bank conducts 1.7 trln yuan of...

January 27, 2025

Fuji Media, rocked by sexual misconduct allegations, says...

January 27, 2025

ECB president fears loss of central bank independence

January 27, 2025

European tech shares tumble as China’s AI push...

January 27, 2025

Futures slip as investors eye China’s latest AI...

January 27, 2025

Markets may be repeating the mistake of 2019,...

January 27, 2025

How billionaire Caltagirone could influence Italy’s banking M&A...

January 27, 2025

How Italy’s MPS went from near collapse to...

January 27, 2025

Analysis-To weather Trump, emerging market investors look to...

January 27, 2025

Chinese AI startup DeepSeek overtakes ChatGPT on Apple...

January 27, 2025
Fill Out & Get More Relevant News








    Stay ahead of the market and unlock exclusive trading insights & timely news. We value your privacy - your information is secure, and you can unsubscribe anytime. Gain an edge with hand-picked trading opportunities, stay informed with market-moving updates, and learn from expert tips & strategies.

    Recent Posts

    • Procter & Gamble to cut 7,000 jobs as part of broader restructuring

      June 6, 2025
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

      June 6, 2025
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

      June 5, 2025
    • This California startup is cleaning water and removing CO₂ from the atmosphere — all at a reduced cost

      June 5, 2025

    Categories

    • Economy (245)
    • Editor's Pick (3,646)
    • Investing (504)
    • Stock (6,426)

    Latest News

    • Procter & Gamble to cut 7,000 jobs as part of broader restructuring
    • Shein and Temu see U.S. demand plunge as loophole for cheap goods closes

    Popular News

    • Asia stocks muted; China shares positive after rate cut
    • China’s BYD surpasses Tesla in quarterly revenue growth for first time

    About The Significant deals

    • Privacy Policy
    • Terms & Conditions

    Copyright © 2025 thesignificantdeals.com | All Rights Reserved

    The Significant Deals
    • Investing
    • Stock
    • Editor’s Pick
    • Economy