Bank of England holds off on rate cut after Fed goes big
Subscribe to enjoy similar stories. The Bank of England left its key interest rate unchanged Thursday, taking a more cautious approach than the Federal Reserve in loosening the restraints it imposed on the economy to tame inflation. While it opted to stand pat, the U.K.’s central bank said that it is likely to follow up on an August cut over coming months in anticipation of a decline in inflation to its 2% target late next year, but also said it is concerned by the still-rapid pace at which services prices and wages are rising.
The Fed Wednesday lowered the federal-funds rate for the first time since March 2020, by half a percentage point. Officials signaled that they are likely to cut the key rate again in coming meetings as worries about inflation ease and concerns about the jobs market grow. But the BOE all but ruled out a move of that size or a quick succession of smaller cuts.
“We should be able to reduce rates gradually over time," said Gov. Andrew Bailey. “But it’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much." The Fed’s decision to trim rates by a larger amount than most analysts anticipated until just a few days ago is a fresh challenge for the BOE and other central banks that have signaled a more gradual approach.
Responding to the changed outlook for interest rates, the British pound has appreciated against the U.S. dollar over recent weeks. Any further increases will add to downward pressure on inflation by lowering the prices of many imports, but will also make it more difficult for Britain’s exporters—including its large tourist industry—to sell to U.S.
Read more on livemint.com
