From Morningstar: 2024-09-18 20:02:00

The Bank of England has kept interest rates at 5%, with inflation rising to 2.2%. They will maintain a gradual approach to policy, waiting to assess the impact of previous cuts. Global growth remains steady, and oil prices have fallen due to weaker demand.

The BoE’s decision was influenced by the service sector’s inflation, rising to 5.6% in August. Governor Bailey remains cautiously optimistic about inflation, emphasizing the need to wait for more data before declaring victory. The U.S. Federal Reserve’s recent rate cut supports the view that inflationary pressures are diminishing.

Markets were disappointed by the BoE’s decision, with the FTSE 100 dipping slightly before stabilizing. Expectations are now on a rate cut in November, with further cuts anticipated in 2025. Equity managers predict a rate cut by the end of the year, adjusting their assumptions based on the BoE’s trajectory.

UK gilt bond prices saw minimal movement following the BoE’s decision, with slight increases in yields for certain maturities. Bond markets are adjusting to expectations of the BoE’s rate-cutting trajectory. The BoE will continue selling gilts, reversing its quantitative easing measures incrementally, with £100 billion of government debt to be shed in 2024-2025.



Read more at Morningstar: BoE Holds Rates at 5% Amid Sticky Inflation