The Bank of England has maintained its key interest rate at a 16-year high of 5.25% during its seventh consecutive meeting, aligning with investors’ and economists’ expectations.
However, the central bank hinted that it might follow other European peers by reducing borrowing costs in the coming months.
While the Federal Reserve remains unlikely to lower its key interest rate soon, other European central banks have already cut interest rates this year.
For instance, today, the Swiss National Bank (SNB) reduced its key interest rate by 25 basis points to 1.25% for the second time this year. Approximately two-thirds of economists had anticipated this rate cut, leading to a weakened Swiss franc.
The European Central Bank (ECB), last 6 June, lowered the interst rate by 25 basis points as well.
Despite the decline in U.K. inflation due to falling energy and food prices, the Bank of England remains cautious.
It believes that rising service prices could push inflation back above its 2% target in the second half of the year, especially if wages continue to increase rapidly.
Although economists expect the Bank of England to lower its key rate at the next meeting, some suggest waiting until November.
Recent data indicate only modest slowdowns in wages and service prices, leaving uncertainty about whether the Bank of England will cut rates before the Fed.
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Source: FedericaMontella.com
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