The financial market believes that the bank will reduce interest rates at the first monetary policy (MPC) meeting in 2025.
However, the trust in the second reduction in 2025 has been cooled. To further complicate the problem, at least one large investment bank believes that the market is incorrect.
What is the basic fee for England Bank?
Today, the UK’s basic rates have been reduced twice in August and November last year, 4.75 %. Shortly before Christmas, the MPC voted for 6-3 votes in a sticky service inflation to hold the price.
Sustainable inflation is afraid that banks will maintain a price for a longer time, and after the fixed interest rate transaction is over, a considerable debt and mortgage holders switch to more expensive packages. Pressure may be applied.
The 12 -month UK inflationata for 12 months until December 2024 indicated that the consumer price index (CPI) has increased 2.5 %. This means that the British prices are still higher than the 2 % target of England Bank.
Currently, the true uncertainty surrounds the trajectory of interest rates in 2025. The recent turmoil in the UK’s gold leaf market can indicate how easy the economic fear and the threat of tariffs in the Trump administration is afraid and affect bond yields. If the Bank of England issues the following decision on Thursday, February 6, the stock market will surely increase, but the bond yield will probably fall.
Does England Bank reduce interest rates?
According to interest rates swap data, the possibility of reducing interest rates on February 6 on February 6 is about 92 %. Currently, further interest rate reductions are not expected in 2025. The data may be reduced by 49.8 % in August, and the data has a 50 % excitement required to show an advantageous probability.
“It seems that there is a contradiction between what investors actually say, with the reduction of 25bps this year, and the interest rate of interest is set,” he said. Strategist Michaelfield says.
“The possibility of the cut on February 6 seems to be high. Many of this optimism are based on the latest inflation. For me, these inflation are very small. Eventually At 4.75 % of the UK, it seems to be too high, especially when inflation is already from the peak. “
At the center of the conversation is the Goldman Sachs of the Investment Bank. The analyst says that it is currently believed that England Bank could have six interest rate reductions by next spring. The forecast for 2024 created in December 2023 was very correct. Investment banks predicted that interest rates would be 4.75 % by the end of the year, but they were wrong when they predicted the reduction in February and March -they were reduced. Instead, August and November.
The factors that support this hypothesis include low economic growth and the end of the “strict” labor market. In this labor market, there are more employment opportunities than available workers and employees with negotiations over salaries.
What do stocks and bonds do if the Bank of England reduces prices?
If England Bank reduces the price next month, the stock market will probably rise to optimism in inflation with Boe inflation. Usually, lower interest rates release money in the actual economy. This can be used for spending. Companies and investors think this is a good thing.
However, this is paid attention. The February MPC conference will be released on the Full Currency Policy Report issued every quarter. This may include further information about what would happen this year in England. Traders and investors are inevitably sensitive to the market because they aim for this kind of information to move the bank’s intentions forward.
Ingrand Bank stated in November 2024 that it was intended to further reduce interest rates in the final monetary policy report associated with interest rates.
“If the inflation is low and stable, it is likely that interest rates will be further reduced,” he said.
“However, it is necessary to be careful not to quickly reduce interest rates or to be too much. High inflation affects everyone, but it is particularly painful, but it hurts. is.”
If England Bank is reduced again, bond yields will probably fall. Bond prices are sensitive to interest changes because monetary policy affects the demand of bonds. With the decline in interest rates, investors usually seek higher returns. This increases the price of the bonds and turns down.
At the moment, the yield of gold leaf in the UK for 30 years is about 5.12 %. The yield of gold leaf, which has risen to a high price that has not been seen since 2008, has retreated, but it has been higher than a year ago.
When is the next meeting of England Bank?
The England Bank has a calendar for a meeting and monetary policy publications, as shown in the table below.
“One -dimensional” role in England Bank
England Bank was independent of the government in 1997, Tony Blair became the prime minister, and Gordon Brown was his new Prime Minister.
Independent policies mean that banks set interest rates without interference from the central government of White Hall. This model is used by the US Federal Reserve, which sets interest rates without input from the White House.
However, some commentators should have more similarities.
Unlike BOE, the Fed has a double mission of price stability and maximum employment. In the political environment where the KEIR STARMER government is working on an increase in economic growth, some say that this model should be deployed in the UK.
Jamie Constable, a chief market strategist of the singer Capital Market, shows that consumers’ trust in the British economy has dropped sharply, and it is necessary to make immediate changes in the trust of fresh consumers last week. Say.
“Consumer reliability and flash purchasing manager indexes are inadequate, emphasizing companies raising prices and reducing their work, the one -dimensional bank inflation bank, according to the Federal Reserve, has worked. He says he will be revised to include it. “
“If the government is really serious about growth and wants to understand how the economy and incentives work to some extent, this change should be made as soon as possible.”
The author or author does not own the stock of the securities described in this article. Find out about Morning Star’s editing policy.