BoE rate cut looms

 
Sam North, Market Analyst at investment platform eToro, says: “The Bank of England (BoE) is announcing their monetary policy decision today and it’s likely they will cut interest rates. Money markets are currently giving a 60% chance of a cut, and the recent rhetoric from the BoE has been mixed, with some members suggesting a hawkish stance and others advocating for rate cuts. Yet with headline CPI at the 2% target, GDP growth for the month exceeding expectations at 0.4% and PMI data indicating positive growth in services and manufacturing, there’s a strong case for a long-awaited rate cut to finally take place.

“If the BoE decides to keep rates on hold, in what would be a slight shock to the market, investors can expect GBP strength and FTSE weakness. On the flip side, if the BoE is more dovish than expected and goes into detail about future cuts, the FTSE would benefit and the GBP would come under pressure against its peers, with the 10-year yield also moving lower.

“One potential barrier would have been the recent upside of services inflation, but that is probably not enough to prevent them from moving forward with a rate cut. Whilst they would foreseeably give guidance on acknowledging further cuts, it would be surprising to hear them being specific about when and how much.”