The Bank of England is widely expected to reduce interest rates on Thursday, amid a complex background for lukewarm local growth expectations, the upcoming increase in taxes paid by companies and tariff threats in the market for the United States Donald Trump.
As of Wednesday morning, the financial markets were 98 % of the lower price of the quarter at the February meeting, which will reach the bank rate to 4.5 %. Bouquet Choose the contract In its previous gathering in December, citing 5 % “high” services and printing a 2.6 % higher address in November. This rate Since cooling to 2.5 %While the inflation of services decreased to the lowest level in 33 months at 4.4 %.
Since January, traders have increased their bets on the total number of cuts in BOE prices that are likely to take place during the year 2025. At the beginning of the year, shells were expected, economists and prominent work votes, including the President of the British Bank Lloydsand Charlie NunThey said they expect three edges. Meanwhile, market pricing is more than 80 basis points of discounts by December, indicating that four discounts may be a possibility.
These bets were built on the back of many data surprises, including Weak retail sales data expected and November's disappointing growth.
On Thursday, the division of voting between the nine members of the Monetary Policy Committee will be monitored-with a unanimous or almost non-identical decision indicating a bias towards mitigation-as well as the updated and enlarged growth forecasts of the Bank of England.
UK economy Rawd in the third quarterAnd Bo has Already The last three months of last year have not shown any growth.
Any translation to 2025 growth forecasts in the Bank of England, or for inflation expectations to 2.7 % in the fourth quarter of 2025 and ease to 2.2 % over 2026, will be considered support for doves.
Uncertainty
The two main evolutions can make the bank's prediction, which is likely to be interrogated by the Governor of Bank of England Andrew Billy.
The first is how the central bank now considers any possible inflationary effect from Financial reforms The UK government announced in October, which includes a significant increase in the tax that companies face on salary statements. A survey conducted by British Chambers of Commerce It was published in January Some companies said they were planning to rise in prices as a result of high costs.
The second question is how the UK will conclude amid Trump's volatile policy The beginning of his dream The trade war with China, which is currently Tamer of what was originally afraid. Trump has Definitions are threatened On imports from the United Kingdom and the European Union, but for it Delaying duties in Canada and Mexico He suggested that other countries be able to negotiate their way out of fighting.
I also suggested that The UK can benefit One of the broader trade conflicts with the United States is the most balanced trade relationship with the largest economy in the world, allowing an increase in investment in the United Kingdom and new business opportunities.
“If Chinese goods find their way to the continent and to the United Kingdom, and exerted price pressure on prices, it gives (the European Central Bank) a greater room to reduce interest rates more than the markets expect this year, especially Dan Burdman Weston, CEO of the BRI investment head Wealth Management, CNBC “Street Signs” on Tuesday, “It is expected to weaken growth during the coming quarters.
This is likely to confirm again the difference in monetary policy between the Bank of England and the European Central Bank – which is seen as a possible lowering a full percentage this year – and the American Federal Reserve, which was seen by pruning by a Half a point at most.
Anthony Karaamamas, the global fixed-firm income head at SEI, said that the UK's situation of “stagnation”-the economic recession in addition to inflation over the goal-was a challenge for the Bank of England because it “seeks to support economic activity during time also commit to the mandate of inflation Fraud.
“In the future, sticky inflation may limit the ability of the governor Billy to reduce prices much more,” Karaamams said in the comments via e -mail.
He said that the central bank is pressing forward at a rapid pace to alleviate, “the UK government bond market may suffer from the punishment of credibility in the form of a much higher allowance,” adding that this will limit the government's scope of spending on this. Productive growth. “
Borrowing costs in the United Kingdom It rose in January Amid a sale in the global bond market, concerns about Britain's deficit and weak growth expectations. Borrowing costs have decreased since then significantly.
