BOE Could Threaten Tightening but Rate Cuts Ahead Look More Likely

Dow Jones
Jul 29

0924 GMT - The Bank of England should leave its key interest rate at 3.75% on Thursday, although it could warn of a possible hike if energy prices rise significantly or second-round inflationary effects surface, Berenberg's Andrew Wishart says in a note. That doesn't mean a hike is likely, however. The threat alone, along with higher oil prices, would be sufficient to increase interest-rate expectations and mortgage borrowing costs, thus reducing inflation risk, he says. Instead, Wishart says the BOE could actually resume rate cuts in December, then lower the policy rate to 3.0% in mid-2027. Wage and services inflation is trending lower, while President Trump will want to avoid higher oil prices into the midterm elections, he says.

 

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