Bank of England edges closer to rate cut, possibly in June, as it predicts below-target inflation

abcnews.go.com:

The Bank of England is keeping its main U.K. interest rate at a 16-year high of 5.25% though it gave a broad hint that a reduction could be on the cards as soon as June as inflation is forecast to fall below target

LONDON — The Bank of England maintained its key U.K. interest rate at a 16-year high of 5.25% though it gave a broad hint that a reduction could be on the cards as soon as June as inflation is forecast to fall below target.

In a statement Thursday, the bank’s nine-member Monetary Policy Committee voted 7-2 to keep rates unchanged, with the 2 dissenters backing a quarter-point reduction. Last time, only one member voted for a quarter-point cut.

Like the U.S. Federal Reserve last week, which also kept rates, on hold the majority on the panel wanted to see more evidence that inflation is under control.

The increase in the number of those backing a U.K. rate reduction is a clear indication that there is a shifting balance on the committee in favor of cuts.

“We’ve had encouraging news on inflation and we think it will fall close to our 2% target in the next couple of months," said Bank Gov. Andrew Bailey. «We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.”

Bailey indicated that the financial markets are more pessimistic about the path of interest rates and that „it is likely that we’ll need to cut bank rates in the coming quarters, possibly more so than is currently priced into markets.”

However, he said a cut at the next meeting in June has “not been ruled out” but insisted that it was “not a fait accompli.”

Headline inflation in the U.K. is down at an annual rate of 3.2%, its lowest level in two and a half