London According to a note shared by the National Institute of Economic and Social Research (NIESR), the oldest independent economic research institute in the UK, due to the slower-than-expected decline in annual inflation in March and the continued high inflationary pressures, it does not seem likely that the Bank of England (BoE) will cut interest rates in May.
The possibility of a rate cut by the BoE in June or August will depend on the inflation data to be announced next month.
NIESR Economist Paula Bejarano Carbo recalled that the annual inflation rate was 3.2 percent in March, stating, “According to today’s data, core inflation, which is currently at 4.2 percent annually, indicates a slight easing of inflationary pressures but remains above the historical average. We anticipate that inflation will likely fall below the BoE’s target of 2 percent in April. Therefore, the BoE will closely monitor developments in core inflation in its upcoming meetings.”
James Smith, Economist at ING Think Advanced Markets, remarked that inflation in the services sector in the country is stickier than the BoE had hoped, saying, “Markets are currently pricing in the BoE’s first rate cut in November. Given BoE Governor Andrew Bailey’s recent dovish comments, this date seems quite distant, but we believe that the latest inflation data reduces the likelihood of a rate cut in May or June. In this context, we continue to expect the first rate cut move to be in August.”
“It doesn’t seem very likely that today’s released data will prompt action from the BoE” Yael Selfin, Chief Economist at KPMG UK, stated that the overall outlook for inflation in the UK is positive but noted that some risks persist.
Selfin mentioned that oil prices rallied last month and the increase reflected in consumer prices, saying, “It doesn’t seem very likely that today’s released data will prompt action from the BoE. We expect inflation to return to target in the coming days of spring, which increases the likelihood of a rate cut starting from June.”
Ian Stewart, Chief Economist at Deloitte, also remarked that inflation is on a downward trend but stated that the BoE “cannot yet be sure it has beaten inflation.”
Stewart also noted that wage increases are exceeding expectations, saying, “The economy is picking up, and the BoE won’t rush to cut interest rates.”
source: aa.com.tr/ prepared by Melisa Beğiç