The Bank of England (BoE) announced on Thursday a policy rate cut of 25 basis points, setting the new rate at 5%, down from 5.25%. The decision was narrowly approved with a 5-4 vote, indicating a split among policymakers.
Key Points from the BoE Statement
Inflation Outlook: The BoE projects the Consumer Price Index (CPI) to increase to approximately 2.75% in the second half of 2024 as the effects of energy base prices diminish.
Economic Growth: The GDP forecast for 2024 is revised upwards to 1.25%, reflecting a more optimistic economic outlook compared to the previous 0.5% forecast. Nonetheless, the BoE anticipates an increase in unemployment and a potential slack in the economy.
Future Policy Decisions: The Monetary Policy Committee (MPC) emphasized a data-dependent approach, ensuring that the bank rate remains restrictive long enough to mitigate inflation risks. There is also acknowledgment of the uncertainty in balancing rate cuts with ongoing quantitative tightening.
Market Impact
Following the announcement, the GBP/USD experienced a decline, trading at 1.2760, down 0.75% for the day. This reaction underscores the market's cautious stance in response to the BoE's monetary policy adjustments.
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