LONDON — The Bank of England is set to keep rates on hold next week, sticking with its gradual approach to cuts after a reduction in May, but investors will look for hints on whether a slowing economy and weaker wage growth could speed up the pace of easing.
All 60 economists polled by Reuters this month expect the BoE to keep rates on hold at 4.25 percent this month and almost all expecting the next quarter-point rate cut to come in August. A large majority seeing a further quarter point reduction to 3.75 percent in the final three months of this year.
“If the outcome of June’s meeting is largely a foregone conclusion, the path of the market into the August forecast round comes down to the market’s assessment of the risk around alterations to guidance,” Moyeen Islam, fixed income strategist at Barclays, said in a note to clients this week.
So far, the central bank has taken what it calls a “gradual and careful” approach to cutting rates due to persistent inflation pressures and wage growth, only reducing rates four times, or every quarter, since August 2024.
But BoE policymakers became more divided in their decision making at the May meeting, tempering investor expectations of a faster pace of rate cuts before weaker domestic data revived bets that the central bank will keep up its a quarterly pace.
The Monetary Policy Committee voted 5-4 to reduce borrowing costs by 25 basis points to 4.25 percent from 4.5 percent in May in its first meeting since US President Donald Trump announced wide-ranging tariffs on trade partners. Policymakers were split three ways in their decision making.
