From Morningstar: 2025-04-28 09:14:00

Traders anticipate Bank of England rate cuts, predicting reductions in May, June, August, and November. Lower rates expected to benefit homebuilders, utilities, and consumer sectors. Market strategist Michael Field sees potential for increased demand and investor interest in dividend-paying stocks. Lower mortgage payments could boost consumer spending, particularly in discretionary sectors like travel and leisure.

Interest-rate swaps data suggest a 107.8% chance of a rate cut in May. Predictions for cuts in June, August, and November at 51.5%, 78.3%, and 53.9% likelihood. Market outlook contrasts IMF’s prediction of three cuts in 2025. Bank of England Governor Andrew Bailey hints at more rate cuts due to escalating global trade tensions.

UK inflation remains above target at 2.6%, prompting pressure on central banks to cut rates amid fears of a global recession. Market volatility driven by US tariffs has led to downward revisions in economic growth projections. Bank of England MPC to issue quarterly report on May 8, revealing outlook for UK economy and potential policy decisions.

Stock markets may react positively to Bank of England rate cuts, but sentiment could be affected by growth predictions. Falling interest rates could impact financial companies and larger stock indexes. Currency fluctuation, defensive nature of UK stock markets, and government policies contribute to market resilience.

Bond markets show falling yields across UK gilts, making them attractive for investors seeking inflation-beating returns. Yields remain above inflation levels, with valuations deemed attractive compared to other markets. Market volatility and inflation predictions impact bond prices. UK gilts seen as more appealing compared to US Treasuries, despite uncertainty in bond markets.



Read more at Morningstar: Will the Bank of England Cut Interest Rates in May?