Interest rates in the UK could see a reduction as early as this summer, according to Ben Broadbent, the Bank of England’s deputy governor.
In a Monday morning speech, he mentioned that a cut in borrowing costs is “possible” if economic trends align with expectations. Currently, the UK interest rate is at a 16-year peak of 5.25%, following a series of hikes by the Bank of England’s Monetary Policy Committee (MPC) aimed at curbing inflation over the last two years.
March saw a decline in CPI (Consumer Prices Index) inflation to 3.2% from the previous year, with forecasts indicating a further decrease towards the 2% target in the near future.
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Broadbent highlighted that the MPC, which consists of nine members and decides on interest rate adjustments, needs to evaluate the ongoing trends in wage and services inflation.
He stated: “Whatever the priors of its individual members the MPC will continue to learn from the incoming data and, if things continue to evolve with its forecasts – forecasts that suggest policy will have to become less restrictive at some point – then it’s possible the bank rate could be cut some time over the summer.”
Clare Lombardelli, chief economist for the Organisation for Economic Co-operation and Development (OECD), is set to succeed Mr Broadbent on July 1. The June meeting will mark Broadbent’s last vote on interest rates, with another decision expected in August.
Earlier this month, Mr Broadbent was among the majority who voted for interest rates to remain at 5.25%, with a 7-2 vote in favour of no change. The financial markets are predicting a reduction in interest rates by August.
