BoE rate cut on the cards this summer, says Huw Pill

14th May 2024 10:26

(Sharecast News) - The Bank of England's chief economist has said it's "not unreasonable" to expect an interest-rate cut from the central bank this summer, as data showed that tightness in the UK labour market may be easing.

Speaking at an event by the Institute of Chartered Accountants in England and Wales on Tuesday, Huw Pill said: "It's not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that bank rate will come under consideration."

While he acknowledged that there is still "some way to go" to bring inflation down to the target level, he said that a potential easing of monetary policy would still leave a restrictive stance in place. "It's important to recognise we can cut bank rate, while still leaving some restriction in the system," he said.

The Bank Rate has been held at a 16-year high of 5.25% since August last year, with the Monetary Policy Committee voting in favour of no change at its latest meeting last week.

However, two of the nine-member committee did vote for a cut, indicating that the mood within the central bank was starting to turn.

Pill said that Bank has made progress on bringing inflation down to the 2% target, which he expects it to reach in the second quarter, though the MPC has to evaluate two inflation releases and another labour-market report before its next policy decision in June.

The market widely expects the BoE to make its first rate cut in August, though the chance of a June cut is slowly rising.

Data on Tuesday also revealed that the UK unemployment rate rose to 4.3% in the three months to March, up from 4.2% a month earlier, while private sector regular pay growth - a closely watched indicator for the BoE - edged down to 5.9% in the three months to March from 6.0% previously.