BOE Monetary Policy Meeting Scheduled for August 7
Investment Industry Expects Fifth Rate Cut
Foreign Media: "Rate Expected to Drop from 4.25% to 4%"
The Bank of England (BOE), the central bank of the United Kingdom, is highly likely to lower its benchmark interest rate from the previous 4.25% to 4% at its monetary policy meeting scheduled for August 7 (local time), according to foreign media reports.
The Wall Street Journal (WSJ) reported on August 4 that the BOE is expected to implement its fifth interest rate cut.
The Monetary Policy Committee (MPC), which consists of nine members, has been lowering the benchmark rate by 0.25 percentage points every three months. The outlook is that this 'gradual and cautious cut' policy stance will continue.
Global investment banks (IBs) see a high likelihood of a rate cut. Bank of America (BoA) and Barclays predict five members will support a cut, two will opt to hold, and two will favor a larger cut. Morgan Stanley expects seven members to support a cut, one to hold, and one to favor a larger cut.
Economists at Morgan Stanley stated in a report, "The MPC is wary of both labor market and inflation (price increase) risks," adding, "The data remains uncertain." They also noted, "In this situation, it is difficult to see the future (interest rate policy) path deviating from the current course."
Robert Wood, chief economist at consulting firm Pantheon Macroeconomics, told the Financial Times (FT) that "doves focus on downside risks related to employment, while hawks point out persistent inflation issues," adding, "Both sides have valid arguments."
The doves include external members such as Alan Taylor and Swati Dhingra. They are expected to advocate for a larger rate cut due to concerns about declining employment. Evidence that wage growth pressures are easing is also expected to support their position.
On the other hand, hawkish members, including BOE chief economist Huw Pill, are likely to focus on the fact that inflation still exceeds the target and may rise further in the future.
BOE Governor Andrew Bailey and three deputy governors, who are considered centrist members, have not denied market expectations for a rate cut this month. However, they have also not disclosed the pace of future cuts or the eventual target level.
Meanwhile, investors expect the BOE to maintain its current rate-cutting stance through the first half of next year, according to the FT. The FT reported, "Market pricing suggests there will be two additional rate cuts in the future," and projected that "the rate could fall to 3.5% by next summer."
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