BANK OF ENGLAND'S RATE CUT PLAN SET TO DIFFER FROM FEDERAL RESERVE'S

Bank of England might be cutting interest rates ahead of the US Federal Reserve. Tune into this detailed analysis to understand the key

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As the Bank of England gears up for its upcoming decision,  speculation mounts on potential interest rate cuts this summer, contrasting with investors’ expectations of a postponed easing outlook. Governor Andrew Bailey has emphasized the UK’s divergence from escalating consumer price pressures in the US, highlighting “strong evidence” of receding inflation domestically. While economists anticipate the central bank to maintain rates at a 16-year high of 5.25 per cent, attention will be on hints regarding whether policymakers view June or August as opportune moments to initiate reductions in borrowing costs.

However, a dovish shift in tone by Bailey and Deputy Governor Dave Ramsden in April caused some economists to reckon that the timing of BOE cuts may be closer to the European Central Bank — which is widely expected to act in June — than to the Federal Reserve, whose chief, Jerome Powell, has avoided offering a timeline for US easing.

Bailey expects UK inflation to fall close to his 2 per cent target in upcoming data for April, though some on the nine-member Monetary Policy Committee are still concerned over underlying price pressures.

“The BOE has sounded increasingly dovish at each of its meetings this year. We think there could be a similar theme in May with policymakers having lately signaled little concern about recent upside data surprises.”

The central bank decision will be followed on Friday by gross domestic product data predicted to show the UK economy exited a shallow recession in the first quarter. Economists expect the figures to show output growing 0.4 per cent after two consecutive quarterly drops last year.