When the Monetary Policy Committee meets next Thursday, the Bank of England is expected to hold an interest rate of 4.25%.
The panel of interest rate settings lowered the base rate by 25 basis points at its last meeting in May, but most economists predicted that it would stop before it lowered further.
Steve Matthews, investment director for Canadian Living Asset Management, said: “We expect the Bank of England to maintain a steady pace this month. Inflation remains persistent, employment data is stable, and GDP printing is benign – indicating no immediate further cuts are needed.
“While the broader trajectory of interest rates remains downward, the road ahead now looks shallower than previously expected.
“Market pricing shows that the next step is unlikely in September and beyond.
“Other than that, uncertainty in U.S. tariffs and trade policy are creating a more cautious global context – no one is willing to act too early.
“It’s a pause, not a pivot, as banks take a measure, data-dependent approach in a stable, lethargic economic environment.”
“Recent data support further ease cases and should reduce MPC concerns about inflation stickiness,” said Edward Allenby, an economist at Oxford economics.
“However, we don’t think the data is enough to push the committee to increase the pace it has seen since last August.”
Allenby believes that MPC will closely monitor salary and job data over the next few months.
They will seek to understand how the labor market responds to April’s rise in employers’ national insurance contributions and the national living wage.
He expects another 25 basis points to be cut this year in August and November.
Former MPC member Michael Saunders is now a senior economic adviser to Oxford Economics and is expected to cut even more.
He said: “Given their emphasis on gradual relaxation, it is unlikely that MPC will lower interest rates at this meeting.
“But the road to further relaxation is becoming clearer.
“I expect MPC to lower bank interest rates by 25 basis points in August, and in the coming year, about 100 basis points, far exceeding the market price.”
