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Bank of England keeps rates unchanged, as expected

Published 20/06/2024, 12:06
© Reuters

Investing.com --The Bank of England left its key rate of interest unchanged at 5.25% earlier Thursday as expected, despite the recent acceleration of disinflationary pressures in the U.K.

The Monetary Policy Committee voted 7-2 to maintain the rate at its current level, the same as at the May meeting, with two members in the minority preferring to reduce the bank rate by 25 basis points to 5%, the BoE said in a statement.

Data released earlier this week showed that consumer inflation eased to 2.0% in May on a twelve-month basis, in line with the Bank of England’s medium-term target for the first time in almost three years.

However, wage growth and underlying pricing pressure remain a concern for the central bank, which has said a return of inflation to its target is not enough on its own to start cutting interest rates.

Bank of England Governor Andrew Bailey opened the door early last month to a rate cut, saying he was "optimistic that things are moving in the right direction,” but the data has not been sufficiently impressive to ensure this.

Almost all 65 economists polled by Reuters last week expect the bank to move in August, with traders pricing in a 30% chance of that happening, while a rate cut is only fully priced in by November.

The British pound weakened slightly against the dollar on Thursday, while the rate-sensitive 2-year Gilt yield edged higher. The blue-chip FTSE100, meanwhile, inched higher.

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