Hopes for an impending Bank of England base rate cut are fading on the back of improved global economic growth and resurgent inflationary pressures.

Markets had been increasingly pricing the first BoE cut in base rate to come as early as June on the back of a surprisingly dovish March Monetary Policy Committee meeting vote, but more recent data has pushed back expectations to later in the year.

Current market pricing now suggests that the first BoE cut won’t come until August, while the forecasted scale of 2024 cuts is less than 50 basis points – meaning the current base rate of 5.25 per cent will not fall below 4.75 per cent by year-end.

The Bank of England's base rate is now expected to stay above 4.75 per cent by year-end.

The Bank of England's base rate is now expected to stay above 4.75 per cent by year-end.

The Bank of England’s base rate is now expected to stay above 4.75 per cent by year-end.

Higher than expected US Consumer Price Inflation figures published on Wednesday followed recent PMI data showing all major UK sectors have returned to growth for the first time in almost two years, while eurozone PMIs have also improved.

All of this suggests the BoE will be in no rush to cut rates, as it will not want to risk another surge in price growth with efforts to stimulate the economy.

Economist and head of research at Panmure Gordon Simon French on Thursday said his firm’s initial decision to bring back its first BoE rate cut forecast from August to June ‘increasingly looks like a mistake’.

He added: ‘We should have had more backbone.

‘The recent upswing in economic momentum across all major geographies and a recovery in core price growth means the balance of risks is shifting fast for central banks – led by a Federal Reserve facing off to incontinent US fiscal policy and a positive wealth effect from a strongly performing equity market.

‘For the Bank of England – facing a rather different domestic backdrop – there is a narrow policy and rhetorical path for it to tread in the coming months that can deliver some easing of domestic interest rates.’

Economic output is improving

Economic output is improving

Economic output is improving 

French said the investment bank still thinks the BoE will trim base rate by 50bps to 4.75 per cent this year ‘but the timing remains deeply uncertain’.

He added: ‘Two key judgements will be required: how much UK easing can be delivered without moving policy off a restrictive setting? [And] how much imported price pressure would crystallise should the BoE ease at a faster rate than the Federal Reserve?’

The Fed typically leads the pack on the path of global interest rates, but some experts now think the European Central Bank could be first to take the plunge.  

French’s comments chime with warnings from BoE policymaker Megan Greene, who on Thursday warned UK rate cuts should remain ‘a way off’ amid persistent inflationary pressures.

She wrote in the Financial Times: ‘Markets now expect the BoE will cut rates earlier and by more than the Federal Reserve this year.

‘Macroeconomic fundamentals and inflation dynamics differ in the UK and US, and there’s a greater risk of persistence in the former. The markets are moving rate cut bets in the wrong direction.

‘Lower UK potential growth means greater inflationary pressures, all else being equal. But all else is not equal. Demand in the UK is far more constrained as well.

‘The UK economy has faced the double whammy of a very tight labour market and a terms of trade shock from energy prices. Inflation persistence is therefore a greater threat for it than the US. But market pricing for interest rates does not reflect this.’

Core CPI data points to resurgent inflationary pressures

Core CPI data points to resurgent inflationary pressures

Core CPI data points to resurgent inflationary pressures 

#fiveDealsWidget .dealItemTitle#mobile {display:none} #fiveDealsWidget {display:block; float:left; clear:both; max-width:636px; margin:0; padding:0; line-height:120%; font-size:12px} #fiveDealsWidget div, #fiveDealsWidget a {margin:0; padding:0; line-height:120%; text-decoration: none; font-family:Arial, Helvetica ,sans-serif} #fiveDealsWidget .widgetTitleBox {display:block; float:left; width:100%; background-color:#af1e1e; } #fiveDealsWidget .widgetTitle {color:#fff; text-transform: uppercase; font-size:18px; font-weight:bold; margin:6px 10px 4px 10px; } #fiveDealsWidget a.dealItem {float:left; display:block; width:124px; margin-right:4px; margin-top:5px; background-color: #e3e3e3; min-height:200px;} #fiveDealsWidget a.dealItem#last {margin-right:0} #fiveDealsWidget .dealItemTitle {display:block; margin:10px 5px; color:#000; font-weight:bold} #fiveDealsWidget .dealItemImage, #fiveDealsWidget .dealItemImage img {float:left; display:block; margin:0; padding:0} #fiveDealsWidget .dealItemImage {border:1px solid #ccc} #fiveDealsWidget .dealItemImage img {width:100%; height:auto} #fiveDealsWidget .dealItemdesc {float:left; display:block; color:#004db3; font-weight:bold; margin:5px;} #fiveDealsWidget .dealItemRate {float:left; display:block; color:#000; margin:5px} #fiveDealsWidget .dealFooter {display:block; float:left; width:100%; margin-top:5px; background-color:#e3e3e3 } #fiveDealsWidget .footerText {font-size:10px; margin:10px 10px 10px 10px;} @media (max-width: 635px) { #fiveDealsWidget a.dealItem {width:19%; margin-right:1%} #fiveDealsWidget a.dealItem#last {width:20%} } @media (max-width: 560px) { #fiveDealsWidget #desktop {display:none;} #fiveDealsWidget #mobile {display:block!important} #fiveDealsWidget a.dealItem {background-color: #fff; height:auto; min-height:auto} #fiveDealsWidget a.dealItem {border-bottom:1px solid #ececec; margin-bottom:5px; padding-bottom:10px} #fiveDealsWidget a.dealItem#last {border-bottom:0px solid #ececec; margin-bottom:5px; padding-bottom:0px} #fiveDealsWidget a.dealItem, #fiveDealsWidget a.dealItem#last {width:100%} #fiveDealsWidget .dealItemContent, #fiveDealsWidget .dealItemImage {float:left; display:inline-block} #fiveDealsWidget .dealItemImage {width:35%; margin-right:1%} #fiveDealsWidget .dealItemContent {width:63%} #fiveDealsWidget .dealItemTitle {margin: 0px 5px 5px; font-size:16px} #fiveDealsWidget .dealItemContent .dealItemdesc, #fiveDealsWidget .dealItemContent .dealItemRate {clear:both} }

Read More: World News | Entertainment News | Celeb News
Mail Online

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like

Bill Gates: ‘I could have learned’ this lesson from Warren Buffett a lot sooner

Bill Gates and Warren Buffett have given each other a few tips…

OpenAI hires new CFO and product chief, announces Apple deal to integrate ChatGPT

Sarah Friar has been named OpenAI CFO Anjali Sundaram | CNBC OpenAI…

Porsche reveals first-ever 911 hybrid sports car, starting at $164,900

2025 Porsche 911 Targa 4 GTS hybrid sports car Porsche Porsche on…

Threatening U.S. election officials is ‘domestic terrorism,’ says Arizona’s Secretary of State

Adrian Fontes (D-AZ) declares victory in his campaign against Republican candidate Mark…