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All eyes will be on tomorrow’s closely watched inflation figures, which will reveal how close price increases are to the Bank of England’s official target.
Mortgage holders, home seekers, city professionals and other borrowers and savers are waiting for an indication of when the UK will see its first interest rate cut of the year, with some analysts predicting it could be as early as next month. We predict that interest rates may be cut in the future.
Ben Broadbent, the central bank’s deputy governor for monetary policy, said if the economy progresses as expected, borrowing costs could be lowered “over the summer” in response to a sharp fall in inflation.
Broadbent said the nine-member Monetary Policy Committee (MPC) will need to assess how “second-order effects” on domestic prices and wages will change the direction of inflation over the next two years. He said there is.
Consultancy Capital Economics expects inflation to fall below the central bank’s 2% target in April figures released tomorrow and to below 1% by the end of the year.
“This confirms our expectation that the central bank will cut interest rates to 3% next year from the current 5.25%, rather than the 3.75% expected by investors,” the consultancy said.
Other analysts believe inflation will return to above 3% by year-end as high services inflation and wage increases in financial and business services remain strong, contributing to higher prices. I predict that will happen.
Mr Broadbent said: “There is a range of opinions across the committee on this point, which is understandable given the rarity of such events in the past and the associated uncertainty about the future.” Masu.
“Whatever the prior information of individual members, the MPC will continue to learn from incoming data, and the situation will continue to inform its predictions, that is, predictions that suggest policy restrictions need to be eased at some point. Bank rates may change if they continue to evolve along with “cuts” over the summer. ”
Earlier this month, the MPC voted 7-2 to keep interest rates unchanged at their current 16-year high of 5.25%, with Mr Broadbent one of seven members who chose not to make any changes. Ta.
Money markets currently indicate that there is a 57% chance that interest rates will be cut to 5% at the next June meeting, and that a rate cut by August is almost fully priced in.