Unicredit: The Bank of England is expected to cut interest rates later than the Federal Reserve and the European Central Bank

Unicredit Bank said that the Bank of England hawkishly kept interest rates unchanged at 5.25% on Thursday, and the Monetary Policy Committee (MPC) tried to suppress market expectations that the bank would quickly follow the Federal Reserve and the European Central Bank to cut interest rates. The MPC said the commissioner’s decision on whether to keep rates unchanged or raise rates was again “very balanced.” Bank of England Governor Andrew Bailey said that there is “still some way to go” to get inflation back to target, that there are differences between the situation in the UK and the US, and that it is too early to speculate on a rate cut. In light of this, we still expect BoE rate cuts to start in Q3 2024, a quarter later than Fed and ECB cuts, reflecting higher UK wage growth and sticky services inflation. But with the UK economy likely to enter a recession in the coming quarters and inflation clearly set to fall to 2% next year, the risk of a BoE rate cut forecast tends to start earlier.