Bank of England Poised for Rate Cuts Amid Economic Slowdown, Governor Confirms
Bank of England Poised for Rate Cuts Amid Economic Slowdown, Governor Confirms
The Bank of England is signalling a strong likelihood of interest rate reductions, with Governor Andrew Bailey indicating a “downward” path for rates, particularly if the job market shows further signs of slowing. This comes ahead of the Bank’s crucial next policy meeting on August 7th, where rates, currently at 4.25%, will be reviewed.
In a recent interview, Bailey expressed his conviction that interest rates are headed lower, stating, “I really do believe the path is downward.” He highlighted the UK economy’s growth lagging behind its potential, creating “slack” that could help temper inflation. The Governor noted consistent signs of businesses adjusting employment and hours, alongside smaller pay rises, partly influenced by Chancellor Rachel Reeves’ move to increase employers’ national insurance contributions to 15% in April this year.
Despite holding rates at 4.25% in June after two earlier cuts this year, the Bank’s stance appears to be shifting more decisively towards easing monetary policy. This development is crucial for millions across the UK, directly impacting mortgage, credit card, and savings rates. The updated outlook follows recent data from the Office for National Statistics, which reported a 0.1% contraction in the UK economy in May, building on a similar dip in April, driven by weakness in manufacturing and retail sales. This economic performance adds pressure on the government’s growth agenda, reinforcing the Bank’s readiness to act.
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