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Markets betting Bank of England more likely to cut first

ended 26. March 2024

Markets believe Threadneedle Street could start cutting rates before the US Federal Reserve and ECB. They suggest there is a 20% possibility of a first rate cut in May compared to roughly a 10% chance the Fed and ECB will cut. What are your thoughts? Will the Bank of England make a break from the peloton or follow the Fed?

12 responses from the Newspage community

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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
The Bank of England don’t have a shred of credibility left. Whatever should happen, won’t. They were too slow to start increasing rates, they then hiked them too high. For sure, they are going to leave them there too long. September will, most likely, be the first rate cute. By then we will have had two years of a stagnant economy, wiping billions of pounds worth of potential off UK plc. Labour need a rethink of the Bank’s mandate when they assume office.
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Riz Malik
Independent Financial Adviser at R3 Wealth
Given the next Bank of England Monetary Policy Committee meeting is now in May, a June cut is possible but that may still be after the Fed. A bold move would have been to cut this month but that horse has bolted.
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Simon Bridgland
Director at Charwin Private Clients
What do Threadneedle Street know that the Us Federal Reserve and the ECB don’t? An early cut would give short-term relief for many households on variable rates but it could come at an almighty cost if too soon. Glaciers have melted away in the time it’s taken for inflation to come down and it’s still not where this crackpot government have decided it needs to be. Households have been dragged through such stringent austerity that cutting the base rate too soon could start to undo all the hard work that people have suffered if inflation starts to rise again.
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Wes Wilkes
CEO at IronMarket Wealth
Given the relative weakness of the economy that the ECB would cut first followed by the UK and finally the US so we're not concensus on that point. Whilst the UK is more resilient than expected there is currently nothing that would shake that view.
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Craig Fish
Director at Lodestone Mortgages
Whilst it would be welcome news, I think that May is likely to be a touch too early. I have said since the beginning of the year that I expect the first cut to be in June, and this could well be before the Fed and ECB.
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Chris Barry
Director at Thomas Legal
Inflation is more than just “sticky” With overall inflation coming down, a lot of people see this as good news and a road to the magical 2% which will trigger a reduction in base rate. In reality it’s energy and food which have seen the largest falls and this was going to happen anyway after last year's dizzy heights. Core inflation however is still at a frightening 6% and showing no signs of coming down. 80% of this country’s output comes from the services sector. Naturally the biggest cost to the services sector is wages and in April, 5% of the working population is about to get a chunky pay rise. The second biggest contributor to inflation is housing cost, and where do we think that is headed as more people roll off cheap rates onto more expensive mortgage products? Mortgage rises = rent rises. Even I can do that maths. So in my view, interest rates will come down, probably in June to stimulate growth but inflation will not be at the magical 2%.
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Michelle Lawson
Director at Lawson Financial
It's definitely more of a when not if issue with rate cuts At some point we need to be bold and take the lead but I think we will be looking at a June cut rather than May, as the UK still seems to be the sheep following the US. Given the outcome of the last MPC vote, there is no real serious indicator of a May reduction.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
The brains at Threadneedle Street would be well served to dish up a bold move and cut rates in May. The nation is ready for this economic shot in the arm, and doing so would start to provide some much needed restbite for businesses and consumers. Cutting rates now would unlikely detract from their lengthy inflation battle.
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Jack Tutton
Director at SJ Mortgages
The Bank of England need to be bold and lead from the from the front by cutting rates in May, this would bring some much needed positivity to the UK economy. As much as this is needed however, I cannot see them making any rate adjustments until at least June.
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Elliott Culley
Director at Switch Mortgage Finance
Considering only 1 member voted to reduce rates at the last meeting would suggest the chances of the Bank of England moving quickly and decisively are still slim. June is still the more likely outcome which will probably be the same time as the Fed.
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Graham Cox
Director at Bridging Hub
Andrew Bailey has been late or wrong on every major monetary policy decision or economic forecast. So whilst I think they should cut urgently, my money would be on the first cut coming in June. Expect the government to laud it as proof of the 'difficult choices' they've made. In reality, inflation has fallen thanks to the series of 14 base rate hikes. Albeit the Bank of England were slow to raise them in the first place.
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Jai Khandpur MRICS
Investment Manager at IP Global
Homeowners would certainly welcome a break if rates were to decrease, but with only one member voting to reduce rates at the last meeting, it seems unlikely that the Bank of England will act by May, June appears to be the more probable timeframe. However, it's encouraging to note that Leeds Building Society has announced cuts of up to 0.25% on selected fixed-rate deals, while newcomer Gen H is also reducing rates by up to 0.2%. Industry experts attribute this to falling swap rates and optimistic comments from Bank of England governor Andrew Bailey.