The Bank of England is predicted to lower interest rates to their lowest point in over 18 months as weak economic growth and declining inflation prompt action.
Traders expect policymakers to ease borrowing costs following official data that showed inflation unexpectedly dropping to 2.5% last month. The Bank Rate is anticipated to decrease from 4.75% to 4.5%, marking the third rate cut since last summer.
Previously, interest rates were raised to 5.25% in an effort to curb soaring inflation, which peaked at 11.1% in October 2022 following Russia’s invasion of Ukraine and the subsequent energy crisis. Now, concerns about Britain’s slowing economy and increasing job losses are shifting policy focus toward stimulating growth.
A recent survey highlighted that the UK’s dominant services sector experienced its fastest job losses in four years last month. Additionally, the escalating tariff trade war between the US and China, the world’s two largest economies, adds another layer of risk to the economic outlook.
Kathleen Brooks, research director at XTB, commented, “The Bank of England is likely to justify the move, even though inflation remains above target, due to a sluggish economy and a softening in the labour market in recent months.”
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