Bank of England interest rate decision June 2024

General view of the Bank of England building in London.

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LONDON – The Bank of England on Thursday chose to hold interest rates steady at its June meeting, confirming market expectations even after UK inflation reached its 2% target.

It keeps the central bank’s key interest rate at a level 16 years Up 5.25%, where it has been held since August 2023.

Seven members of the Monetary Policy Committee voted in favor of maintaining, while two favored a 25 basis point rate cut, which is the same as what happened during the bank’s meeting in May.

The Monetary Policy Committee indicated in a statement that inflation had reached the central bank’s target and said that indicators of “short-term inflation expectations” and wage growth had declined.

The MPC added that it was “extremely difficult to measure the development of labor market activity” due to uncertainty over ONS estimates.

In a repeat of previous messages that some analysts thought could fall, the bank again said monetary policy should “remain tight long enough to return inflation to the 2% target sustainably.”

Inflation data on Wednesday showed that the headline price rise fell to 2% in May, meeting the central bank’s target ahead of the United States and the eurozone, despite the UK suffering from a sharp rise in inflation over the past two years.

However, economists say continued rise in services rates and core inflation in the UK indicates the possibility of continued upward pressure.

The UK’s decision to hold the election comes just two weeks after a general election in which the state of the economy and proposals to restart sluggish growth emerged as a key battleground.

Despite speculation that the politically independent Bank of England may act more cautiously as a result of the upcoming vote, Governor Andrew Bailey stressed that it would remain focused on its own data.

Attention will now turn to the prospects of a rate cut in August. Money market rates indicated there was only a 40% chance of that happening after Thursday’s statement.

The British pound extended its losses against the US dollar, trading 0.2% lower at $1.2685 at 12:24 pm in London.

Other central banks in Europe have already begun to ease monetary policy, including the Swiss National Bank, the European Central Bank and the Riksbank, as they seek to revitalize economic growth.

This is despite the US Federal Reserve, sometimes seen as the central bank leader due to the US’s outsized influence on the global economy, has left traders pondering the date of the first interest rate cut. Money market pricing indicates a 64% chance of a rate cut in September, according to LSEG data.