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The outer part of the English financial district of the capital, February 6, 2025 in London, England.
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During the meeting on Thursday, the Bank of England retained its key interest rate by 4.25%, and economists expects the Central Bank to expect before August before it is reduced again.
Six of the nine of the Boe monetary policy decided to hold the rates, and three chosen for 25 basses.
“It seems that the main growth of GDP in the UK (gross domestic product) remained weak, and the labor market continues to loosen, which has led to more clear signs that profitability has opened over time,” the Central Bank said.
“Model growth measures continue moderately, and, as in May, the Committee is waiting for a significant slowdown in the rest of the year,” the IPC says “remain vigilant in what extent, to which the pressure of the pressure will be nourished to inflation consumer prices.”
The Central Bank warned that “global uncertainty remains increased” and energy prices are increasing from the escalation of the conflict in the Middle East. “The Committee will remain sensitive to the increased unpredictability in the economic and geopolitical environment, and will continue to update its economy’s risks,” it added.
The Central Bank has concluded a bilateral risk for inflation, noting that “given the worldview, and further disinfection, a gradual and attentive approach to further cancellation of the restraint of monetary policy remains appropriate.”
“The monetary policy is not on the way to the installation,” he pointed out that in the likely signal the market and investors to moderate expectations of the rate.
The Central Bank’s decision was a little more than expected, Daniel Mahoni, the UK economist in Hindelsbanken, CNBC said.
“I think most people in the markets thought it would be 7-2 (split among MPC members) so I think it’s interesting, but I think these three members (choosing a reduction) are obviously focusing on some of these home indicators,” he said on Thursday the CNBC.
The fact that the bank mentioned that it was “not on the way before the application” was a “critical point”,-said Mahoni.
“This is very talked about by these geopolitical uncertainty. If oil prices increase further, it can potentially mean to the north of 4% inflation rate, so I think if you may get $ 85 a barrel, and we can reach this (inflation).
The decision of the policy on maintenance of the rate comes after the latest data on Wednesday, showed that the annual inflation in the UK reached 3.4% in May, which correspond to the expectations of analysts, but delaying much above the target of the bank of 2%.
Earlier this year, the Bank of England said that in the third quarter it is counting on inflation up to 3.7%before starting to cool next year. However, he still does not know the results of the US President Donald Trump’s world tariff policy, and, when a conflict has fallen into the Middle East, the pressure on inflation may grow.
This pressure combined with unsuccessful growth in the UK after 0.3% economic reduction in April put the Central Bank in a difficult position on or – and when – to reduce the rates.
“Last month, the bank divided 5 (MPC members) up to 4 per decision to reduce the rate slightly, and most very much see that the economy slows down, and the threat slows down when tariffs and other US policy trace through the economy, so it is anxious,” John Giv, former deputy governor of England, said CNBC.
“The question was:” Is it worth cutting or waiting now? ” “That’s how they looked at it (then),” he added.
“The conflict in the Middle East complicates further. For the first time, it can affect the oil prices that can push inflation even more … And, secondly, it can be devastating for the global economy and trade, which will be down to our growth again, so where the bank is now,” he said.
Economists, Reuters, are widely expected that BOE policies reduce rates by 25 basic points (BPS) at the next meeting in August and make another 25 points in the fourth quarter.
Hryvil said that the fusion of external, uncontrolled and potentially inflation pressure – along with an internal worldview for growth, taxation and costs – made the prediction of the Boe strategy.
“What expects banks and markets is that interest rates will be up to 4%, or perhaps slightly lower than the rest of the year, if there is no really great development on the world stage, but we do not know how this conflict in the Middle East will be played out and we do not know how the tariffs will play. said.
