Bank of England base rate cut

Commenting on today’s Bank of England base rate cut, Chris Arcari, Head of Capital Markets, Hymans Robertson says:

“The market fully expected today’s cut from the Bank of England (BoE) by 0.25% pa to 4.0% pa. Looking ahead, the market anticipates one more 0.25% pa cut before year-end, followed by another in 2026, taking the bank rate to 3.5% pa. Once again, the central bank is being forced to walk the tightrope between weakening growth and persistently above-target inflation. Monthly GDP data point to contractions in both April and May while there’s evidence that firms are cutting jobs in response to higher employer payroll taxes. This will intensify pressure on the Bank to overlook the expected rise in inflation – forecast to reach nearly 4% in September and already above target. The BoE in an unenviable position: continue to cut rates and risk de-anchoring inflation expectations (regardless of whether the current price rise is temporary or not); or keep policy rates higher and risk delaying a revival in growth.”

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