Bank of England: The conditions for rate cuts this summer are unfolding – ANZ

Economists at ANZ Bank currently favour an August cut from the Bank of England (BoE), but the main message is rates will be falling this summer.

Conditions for UK rate cuts unfold, August favoured

The conditions for rate cuts from the BoE this summer are unfolding, and we expect sharp falls in inflation as the economy moves through Q2. However, much of the reduction in inflation will be driven by base effects from lower energy and utility prices. The MPC will need to disentangle transient from more permanent signals on inflation. We think wage growth developments will help provide a yardstick for gauging underlying inflation trends. 

Rather than rushing into rate cuts, we think there is merit in waiting for as much data as possible to be confident that inflation is sustainably on track to meeting the 2% inflation goal. That is why we currently favour an August rate cut over the preceding meeting in June. The August meeting will also be accompanied by the BoE’s updated economic and inflation forecasts.