Bank of England holds policy rate at 3.75%…prospects for future cuts rise

JOON HYOUNG LEE

Summary

The Bank of England said it held the policy rate at 3.75% per year.
Four of the nine Monetary Policy Committee members favored a 0.25 percentage-point cut to 3.5%, raising the likelihood of future cuts.
Governor Bailey said there may be an opportunity for additional cuts this year, further boosting market expectations for easing.

Forecast Trend Report by Period

The Bank of England (BoE) left its policy rate unchanged.

The BoE said on the 5th (local time) that it decided at a Monetary Policy Committee (MPC) meeting to keep the policy rate at 3.75% per year. Five of the nine MPC members, including BoE Governor Andrew Bailey, supported holding rates. The remaining four members called for a 0.25 percentage-point cut to 3.5%.

The BoE has cut the policy rate six times since August last year. At 3.75% per year, the policy rate is at its lowest level in two years and 10 months.

Analysts say the likelihood of future cuts has increased. In a statement that day, Governor Bailey said, "We decided to hold rates today because we need to ensure inflation does not rise," adding, "(However) if everything goes well, there may be an opportunity for additional rate cuts this year."

In its full statement, the BoE said that while the year-on-year rise in the consumer price index (CPI) remained above the target (2%), it is expected to fall close to the target from April this year. Governor Bailey did not specify the timing of any future rate cut, but with more members than expected voting for a cut, market expectations for further easing have grown.

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