THE BANK OF ENGLAND is expected to maintain its interest rate at 4.75 per cent on Thursday, even as the economy shows signs of slowing. Persistent inflation pressures are likely to prompt the central bank to stick to a “gradual” approach before reducing borrowing costs.
A Reuters poll of 71 economists unanimously predicted no change in rates for now. Most anticipate a quarter-point cut on 6 February, followed by three additional cuts by the end of 2025.
Financial markets, however, are less confident about the extent of rate cuts next year. Data released on Tuesday revealed an unexpected rise in wage growth, leading investors to price in only a 50 per cent chance of a rate cut in February and just two cuts by the end of 2025.
In contrast, the European Central Bank has already reduced rates by 1 percentage point this year and is expected to cut another point in 2025, responding to political and economic challenges in the eurozone.
The divergence in rate policies has widened the gap in yields between British and German 10-year government bonds to its largest since 1990.
The US Federal Reserve, which foresees only two rate cuts in 2024, reduced rates by a cumulative 1 percentage point on Wednesday—twice the pace of the Bank of England Read More….