Traders Trim Odds of BOE Rate Cut in August to 50% After Pill


(Bloomberg) -- Conviction that the Bank of England will deliver an interest-rate cut at its upcoming decision waned after Chief Economist Huw Pill emphasized that inflation remains persistent in the UK. 

Traders trimmed bets on a quarter-point rate cut at the central bank’s August decision, pricing in less than a 50% chance of such a move for the first time in around three weeks. Pill said that interest rate cuts are a matter of “when rather than if” but also signaled lingering concerns over stubborn price and wage pressures.

With his colleague Jonathan Haskel signaling earlier this week that he will vote to leave interest rates at a 16-year high, the chances of a cut are dwindling, forcing a repricing in markets. The pound extended gains, rising 0.4% to $1.2835. 

The BOE last month gave the impression that more people on the nine-member Monetary Policy Committee were ready to ease borrowing costs, saying the decision to leave the key rate unchanged was “finely balanced” for some.

It’s “looking unlikely Pill will vote for a cut in August,” said Neil Jones, a foreign-exchange salesperson to financial institutions at TJM Europe. “There is clear concern over upside risks to inflation.”

Pill’s speech is in one of the first appearances by an official since a communications blackout was lifted after the general election last week. While inflation is back at the BOE’s 2% target, both services inflation and wage growth remain strong.

--With assistance from James Hirai.

(Adds context throughout.)

©2024 Bloomberg L.P.

Top Videos