The Bank of England (BOE) is considering further interest rate cuts amid deteriorating economic and labor market data, Bloomberg reports. The decline in exports caused by US trade tariffs, coupled with higher taxes, has already led to weaker GDP growth in April and significant job losses. Inflation, despite a temporary acceleration, is also showing signs of slowing down. These factors strengthen the case for the central bank to adopt a more accommodative monetary policy.
Markets are now almost certain that the BOE will cut rates in the summer, even though inflation persists. Economists expect borrowing costs to stay at 4.25% after the next meeting, though some Monetary Policy Committee (MPC) members may push for looser policy.
Morgan Stanley Chief UK Economist Bruna Skarica suggests that the upcoming meeting minutes will likely highlight weak wage growth and slowing inflation, reinforcing expectations of a rate cut as early as August. However, rising oil prices due to Middle East tensions could temporarily complicate the decision.