From Morningstar:

The Bank of England’s Monetary Policy Committee voted to maintain rates with a majority of six to three. Governor Andrew Bailey anticipates inflation to fall to 3% in March, increase again in Q3 and Q4, then level off at 2.3% in two years and 1.9% in three years. The Bank will continue to monitor conditions, but hinted at more restrictive monetary policy to maintain the 2% target in the medium term.

While the Bank of England has not indicated potential rate cuts, one member voted to cut, hinting at a possible shift in their stance. Markets are anticipating the first rate cut in June 2024, after initial predictions for a February or March cut.

Commentators suggest that the BoE’s insistence on keeping rates stable indicates a deliberate strategy to manage inflation. Although an increase in inflation was expected, the impact on savings and consumer debt may be unfavorable. However, lower rates could benefit equities and bonds, which are expected to react positively to a cut, potentially boosting economic growth.

A shift towards rate cuts could benefit the real economy – businesses and retailers – by stimulating consumer spending and GDP growth. In theory, lower rates should encourage spending and boost the economy, but given the uncertainty, it will take time to observe the precise effects.



Read more: BoE Holds Rates at 5.25%, No Sign of Cut Any Time Soon