BOE Cuts Rates to Two-Year-Low Following Rare Re-Vote
What did we learn from this decision? Well, Lisa, I can hear you saying that Donald Trump is going to be disappointed because now the Bank of England's rate is lower than the Federal Reserve's 4% as expected. But there is drama beneath that rate cut. So they've cut it despite inflation being a 17 month high. But the worries here are about the growth in the economy, the contractions back to back that we've seen earlier in the year and the slowdown in hiring. But look at this vote split. So initially they had a 4-4-1 split and then they had to recast the vote and go again. So because it was so finely balanced, they ended up on that 5-4 split, five voting for a quarter point cut and the other four voting for a hold. The expectation, the most common expectation going into this was for a three way split of 2-5-2. But I have to say the expectations were absolutely all over the show going into it, just reflecting how much uncertainty there is here. In terms of the forecast, as you noted, too, in terms of inflation. They've upgraded it. So they had seen 3.7% as the peak. They now see it as 4% in September as the peak, and they see inflation at 2% in the third quarter of 2027. So way down the line and 2% in the third quarter of 2028, that is when we will be back at the inflation target in the third quarter of 2027. So as you say, the pound is up. It's been read as a hawkish cut, this because of these worries about inflation.
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