Bank of England: To Cut or Not to Cut Interest Rates
Of the 3 central banks holding monetary policy meetings next week, the Bank of England is the only one expected to alter interest rates. A 25bp rate cut is the current forecast even though the rate decision is really a close call.
The minutes from the last Bank of England meeting revealed that one of the main reasons why the BoE did not cut interest rates last month was because they were worried about how the market would perceive a back to back interest rate cut. Inflation has picked up since then and UK economic data has been mixed, but the growing reluctance by mortgage lenders to extend new loans may force the Bank of England to take further steps to ease monetary policy. Co-operative Bank joined First Direct in withdrawing all 2 year mortgages. Halifax, the nation’s largest mortgage lender is expected to follow suit in the coming weeks. Tighter credit conditions could put further pressure on the UK housing market which will lead to more losses and defaults. Aside from the BoE meeting, consumer confidence, industrial production and the UK trade balance will be released.
The minutes from the last Bank of England meeting revealed that one of the main reasons why the BoE did not cut interest rates last month was because they were worried about how the market would perceive a back to back interest rate cut. Inflation has picked up since then and UK economic data has been mixed, but the growing reluctance by mortgage lenders to extend new loans may force the Bank of England to take further steps to ease monetary policy. Co-operative Bank joined First Direct in withdrawing all 2 year mortgages. Halifax, the nation’s largest mortgage lender is expected to follow suit in the coming weeks. Tighter credit conditions could put further pressure on the UK housing market which will lead to more losses and defaults. Aside from the BoE meeting, consumer confidence, industrial production and the UK trade balance will be released.
