abrdn: BoE a few months away from interest rate cuts

Mar 21, 2024

Luke Bartholomew, Senior Economist at abrdn, comment's on BoE's interest rate decision:

'No surprises in the Bank’s decision to keep rates on hold. But the composition of the vote on the Monetary Policy Committee is a bit surprising, with both policy makers who had previously voted for further rate increases voting today to keep policy on hold. This change in vote will fuel market speculation about the Bank pivoting towards rate cuts in the near future.

Certainly, the recent progress on returning inflation to target is encouraging, with inflation likely to be below 2% by the middle of the year.

But with wage growth still elevated and underlying inflation pressures likely to pull inflation higher again in the second half of the year, we think we are still a few months away from the first rate cut. However, once cuts start, ongoing economic weakness could see rates fall quite materially over the next few years.'