England Bank to resume rates cuts in the middle of a murky perspective

The Bank of England is expected to reduce interest rates on Thursday, in the middle of a complex backdrop of a warm internal growth perspective, an upcoming increase in taxes paid by companies and tariff threats of the president of the president of the president of the United States, Donald Trump.

Until Wednesday morning, monetary markets had a price at a 98% probability of a quarter -point rate reduction at the February meeting, which would take the banking rate to 4.5%. The BOE He chose to hold At its previous meeting in December, citing the inflation of “high” services of 5% and a main impression of 2.6% in November. That rate has Since it cooled to 2.5%while inflation of services fell to a minimum of 33 months of 4.4%.

Since January, merchants have increased their bets on the total number of BOE rates cuts that will probably take place for 2025. Where at the beginning of the year only two ornaments, economists and prominent commercial voices were expected, including British Bank head. Lloyds, Charlie NunnThey have said that they anticipate three ornaments. Meanwhile, markets set fixing more than 80 basic points in December, suggesting that four reductions could be a possibility.

These bets have been based on the back of several data surprises, including Weakest retail sales data than expected and Disappointing growth of November.

Thursday observed on Thursday will be the division of votes between the nine members of the Monetary Policy Committee, with a unanimous or almost unanimous decision that suggests a bias towards flexibility, as well as the updated growth and inflation projections of the BOE.

The United Kingdom economy stagnant in the third quarterAnd the BOE has already predicted That the last three months of last year did not show growth.

Any reduction of the 2025 growth projections of the BOE, or its inflation perspective to reach 2.7% in the fourth quarter of 2025 and the ease of 2.2% in 2026, will be seen as support for pigeons.

The first is how the Central Bank now sees any potential inflationary impact of the Fiscal reforms Announced by the United Kingdom government in October, which includes a significant increase in the tax that companies face in payrolls. A survey conducted by British Chambers of Commerce Posted in January He said some companies were planning price increases as a result of higher costs.

The second question is how it will go to the United Kingdom in the middle of Trump’s volatile commercial policy and the Beginning of your Tit-For-OT The commercial war with China, which is currently more moderate than was originally afraid. Trump has threatened with slaughtering tariffs about imports from the United Kingdom and the European Union, but its Delay of duties in Canada and Mexico He has suggested that other countries can negotiate their output of the fight.

It has also been suggested that United Kingdom could benefit From broader commercial disputes with the USA. Due to their most balanced commercial relationship with the world’s largest economy, which allows an increase in the investment of the United Kingdom and the new commercial opportunities.

“If Chinese products find their way to the continent and to the United Kingdom, and exert a downward pressure on prices, it gives the (European Central Bank) and the BOE more reach to reduce interest rates more Aggressive of what markets anticipate this year, especially as growth is expected to weaken in the next quarter, said Tuesday “Dan Boardman-Weston, Executive Director and Investment Director of Bri Wealth Management, the” street signs “of CNBC.

It is likely that this reaffirmed the divergence of monetary policy between the BOE and the ECB, which the markets consider that they can be reduced by a percentage point this year, and the Federal Reserve of the United States, seen by a Half a maximum.

Anthony Karaminas, Global Chief of Fixed Revenue Sub-acare in SEI, said that the situation of the United Kingdom of “Stagflation-Lite”, the economic stagnation combined with inflation above the objective) was a challenge for the BOE, since it seeks Economic activity while supporting economic activity while also adhered to its explicit inflation mandate. “

“Looking to the future, sticky inflation could limit the ability of Governor Bailey to reduce rates much more,” Karaminas said in comments sent by email.

The Central Bank presses with a rapid relief rhythm, the United Kingdom government bond market “could suffer a credibility fine in the form of a significantly higher term premium,” he said, adding that this would limit the scope of the government to increase the economy at a time when “it desperately needs a dose of growth driven by productivity.”

Loan costs from the United Kingdom Spiked in January In the midst of a global market of slow and fueled bonds by concerns about the deficit of Great Britain and the weak growth forecasts. Since then, loan costs have fallen significantly.