As election looms, BoE set to sit tight on UK rate
Bank of England was set to hold its interest rate steady on Thursday despite slowing UK inflation, with higher price risks and Britain's looming election preventing a cut, according to analysts.
The BoE was widely forecast to keep its cost of borrowing at 5.25 percent, a 16-year high, following a regular monetary policy meeting.
This despite the UK annual inflation rate slowing in May to a near three-year low of 2.0 percent, matching the central bank's target.
«Despite inflation falling back to target, the BoE isn't expected to cut rates» Thursday, noted ARJ Capital analyst Manoj Ladwa.
«Given the upcoming UK general election on July 4th, traders are instead expecting the bank to cut rates in August.»
— 'Political bias' -
Julian Jessop, from the Institute of Economic Affairs think tank, said the BoE would likely sit tight as UK services inflation remains well above two percent, while energy bills are set to rise towards the end of the year.
Nevertheless, the central bank «should not hesitate to cut interest rates, even during an election campaign.
»Importantly, the Bank should avoid the perception of political bias in either direction and make their decision on the basis of the better news on the inflation data," Jessop added.
Analysts argued that the inflation drop, while handing a boost to embattled Prime Minister Rishi Sunak, was unlikely to prevent his Conservatives from losing the election to the main opposition Labour party.
Keir Starmer's
