There Bank of England prepares tomorrow to confirm rates interest rates unchanged, despite the more than positive data on inflation, which was brought back in line with the Central Bank's target of 2%. A movement that will not change the status quo, also dominated by the uncertainties relating to the elections which will take place next month.
Inflation slows
Inflation in the United Kingdom he slowed down again in May 2024, attesting at 2%, in line with expectations and the target of the central bank. At the same time, consumer prices increased by 0.3% on a monthly basis, in line with the previous month's figure and below the expected +0.4%.
The slowdown in inflation was favored above all by the cooling of energy product prices. The core inflation figure, which excludes the most volatile components such as food and fuel, recorded an increase of 0.5% on a monthly basis, after +0.9% in April. The trend change stands at 3.5% from +3.9% in April and therefore remains much higher than the desired 2%.
The prospects for the months to come
Despite the reduction recorded in the summer, due to the low prices of energy products, economists and the Bank of England itself expect inflation to rise again in the autumn.
This expectation is also motivated by the data relating to the growth ofinflation in servicesdetected “stickier than expected”, and the data relating to wage growthwhich is rather confirmed high for the BoE around 6% in June, despite signs of a slowdown in the labor market.
Market bets
The money marketbased on this data, has reformulated interest rate expectationsindicating a very small one 5% chance of a rate cut at tomorrow's meeting. At the beginning of the week, the odds were certainly higher.
Even bets on a possible cut of August have been reduced at around 30%, so that today the most probable date of intervention would seem to be September, coinciding with the Fed's intervention.
At its last meeting in May, the central bank said that the latest inflation data had been “encouraging”, but that the possibility of a cut of rates would have been evaluated at each meeting and based on the most recent data.
The unknown elections
There Bank of England like other central banks it is obviously a body independent from politics, but certainly the looming elections will put some pressure on bankers, who could also consider an early cut in August. Both the Conservative Party currently in power is i Labourthe main opposition party, have focused their agendas on the UK's economic performance, meaning that central bank action or lack thereof will be carefully monitored.
