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The Bank of England will implement its first interest rate cut since 2020 at midday on Thursday, if financial markets and many economists are right, hours after the US central bank signalled it could act next month.
The Federal Reserve held its benchmark rate in the 5.25%-5.50% range on Wednesday evening but downgraded its view on inflation to just “somewhat elevated” and hailed “further progress” in the right direction.
The message was exactly what had been expected and was seen as opening the door to a cut at the next meeting, which ends on 18 September.
Fed chair Jay Powell told reporters it was possible so long as the data continued to move in the right direction.
Money latest: Major banks cut rates ahead of BoE announcement
The Fed announcement cleared the way for the Bank of England to take centre stage the following day.
This interest rate decision was seen as more finely balanced but likely by a majority of economists polled by the Reuters news agency in advance.
There was a 65% expectation of a reduction from 5.25% to 5%, according to market expectations reported by LSEG.
But many commentators added that a lack of guidance from the Bank meant a rate cut was far from nailed on.
That has been partly blamed on the recent UK election – with the members of the Bank’s monetary policy committee anxious to preserve its independence.
A rate cut would be a hugely welcome step for millions of borrowers, such as mortgage holders, who have felt the impact since the Bank began its battle against inflation in December 2021.
The UK was the first major western economy to react to the pick up in the pace…
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