Economists Predict First Interest Rate Cut in Four Years at Bank of England Meeting
A recent poll conducted by Reuters news agency reveals that a significant majority of economists expect the Bank of England to cut interest rates at their August meeting. This would mark the first rate cut in over four years, with the current rate standing at a 15-year high of 5.25% after 14 consecutive hikes.
Of the 60 economists surveyed from July 18-24, over 80% predicted a rate cut to 5%. However, there is a lack of consensus among markets, with only a small majority (54%) expecting rates to be held and the remaining minority (46%) anticipating a cut. Even a previous Reuters poll in June showed a higher certainty of a rate reduction, with 97% of economists surveyed predicting a cut before the release of the latest inflation data.
This divergence of opinion between economists and markets is not uncommon, with past trends showing a flip in positions with economists predicting a hold and markets anticipating a cut. The potential effects of a rate cut are already being seen, with Nationwide, one of the UK’s largest mortgage lenders, offering a five-year fixed-rate mortgage deal at less than 4%.
The last time the Bank of England cut interest rates was in March 2020, around the same time that the COVID pandemic broke out in the UK. The high interest rates were initially implemented by the Bank to combat inflation and bring it down to 2%. While inflation has reached this target in the last two months, the Bank has kept rates at 5.25%, making borrowing expensive for individuals and businesses.
The upcoming Bank of England meeting will reveal whether the predictions of economists will come to fruition and provide relief for borrowers through a rate cut.
