Bank of England: to cut or not to cut rates before August?
UK inflation fell to 3.4% in February from 4.0%. While this latest CPI reading raises hopes for a rate cut as soon as August, Angeline Ong examines why ‘August’ is not a done deal and the BoE might push cuts later into the year.
(AI Video Summary)
To cut or not to cut rates before August?
The Bank of England has a decision to make about whether or not to lower interest rates before August. If you trade the British pound, you would prefer that they don't lower rates, but the ruling Conservative Party wants them to because it would benefit them.
The situation is not simple because although UK inflation has gone down from 4% to 3.4% in February, it's still uncertain when or if the Bank of England will actually lower rates. The reaction in the value of the GBP/USD pair was not significant, which shows that there is a lot of uncertainty about when the rate cut might happen.
Factors that could impact inflation
There are still factors that could push inflation up, like higher prices for oil and wood. On top of that, we can expect costs to rise even more because of higher oil prices and higher prices for imported food. This is due to both Brexit-related red tape and higher costs in the months to come. According to a poll by Reuters, 40% of economists think that the Bank of England will lower rates before 1 August. However, if inflation keeps going up, a rate cut may not be guaranteed.
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