WHEN WILL UK INTEREST RATE CUTS START?

29.04.2024 As annual inflation trends towards 2% I look at the likely timing of the first Bank of England interest rate cut.

                UK annual CPI inflation has fallen from a peak of 11.1% to its current rate of 3.2%. This has been driven by a normalisation of energy, food and goods price inflation.

                By contrast service sector inflation is currently 6% and has keen kept elevated by the high wage settlements of recent years. However, surveys suggest that private sector pay settlements will be around 4% for the financial year 2024/25. So as the year wears on more moderate wage settlements should begin to push service sector inflation lower.

                For the Bank of England, the key variable is service sector inflation.  This is because it is a good indicator of domestically generated inflation. So, it seems unlikely that the UK central bank will consider cutting interest rates until it has moderated to 4%. As a result, interest rate cuts are deemed unlikely to begin before August.

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This post was written by Robin