Investing.com – UBS said the Bank of England will authorize its first interest rate cut in August, later than previously expected, amid higher-than-expected inflation.
UBS previously judged that the Monetary Policy Committee’s change of forward guidance at its meeting on May 9 opened the door to an interest rate cut, and that the May inflation expectation fell close to 2%, which would enable the Bank of England to honor its interest rate cut expectations for the first time. 25 basis points.
However, subsequent labor market and inflation data were generally disappointing, the bank said.
“In particular, UK inflation in April increased by 0.9 percentage points year-on-year to 2.3%, a smaller-than-expected decline. Among them, service industry inflation fell by 0.9 percentage points year-on-year to 2.3%, a smaller-than-expected decline. Among them, service industry inflation fell by 5.9% year-on-year (UK The central bank’s forecast of 5.5% year-on-year) is the main disappointing factor,” UBS analysts said in a June 11 report.
In addition to data, we believe recent political developments in the UK have also reduced the likelihood of a rate cut in June.
UBS said: “We do not believe that Chancellor Sunak’s call for a general election on July 4 will have a direct impact on the Bank of England’s policy outlook, given considerations of the Bank’s operational independence.” “However, the Bank of England decided to cancel the All the speeches and public statements made before the election indicate that the bank is taking a cautious approach in this regard.”
Against this backdrop, we now believe the MPC will delay the first rate cut until early August (i.e. after the election). However, with May consumer price index (CPI) due to be released on June 19, the day before the Bank of England meeting, we acknowledge that there are some risks to our forecast.
UBS said the June meeting will not be accompanied by new forecasts or press conferences, so we expect the MPC’s forward guidance and the MPC vote result (7-2) to remain unchanged, indicating that the assessment will not be better than in 2017 Significant changes occur.
