BoE open to August interest rate cut

In August, the Bank of England may lower interest rates, marking the first decrease in borrowing costs in almost four years.

In a tight vote on Thursday, the Bank decided to keep interest rates at 5.25%.

Data from earlier this week showed that inflation, a gauge of how quickly prices are rising, had decreased to 2% in May, which is in line with the Bank of England's objective. There is a chance, nevertheless, that some regions of inflation may stay high.

However, the minutes from the Bank's rate-setting committee meeting revealed a marked shift in strategy, suggesting that when they convene again on August 1, a majority of members may vote in favour of a drop.

Although it's not a done deal, this wording sends a strong message to the public and markets that a rate decrease is now the most likely result of the Bank's next decision, which will come after it completes its updated economic predictions.

The price increases for services, which include the cost of goods like movie tickets, restaurant meals, and vacations, continued to be greater than anticipated, according to Wednesday's inflation report.

However, the minutes state that some variables, such as the increase in the national living wage and expenses that automatically increase in line with inflation, including mobile and internet, are to blame for the slow decline in services inflation.

Members of the committee who are inclined towards a reduction, including the prominent leadership of the Bank of England, are downplaying the extent of the underlying inflationary pressures.

If the Bank does decide to lower interest rates in August, it will be the first since the UK was about to enter the first Covid lockdown in March 2020.

The most recent Bank judgement was made just before the general election when political parties were vying for control of the UK economy's future policies.

The Bank emphasised that the election's date was "not relevant to its decision" on interest rates.

(Sources: bbc.co.uk)