Rate cut likely in summer as UK returns to growth

CITY expectations on the timing of the first rate cut from the Bank of England were hardening around June today after latest GDP data showed the sickly UK economy only slowly recovering from recession at the start of the year.

- Jonathan Prynn

Most analysts believe that the Bank’s Monetary Policy Committee (MPC) will not sanction the start of the rate cutting before then because of the risk of stoking up prices and wages again before inflation is fully conquered.

However, leaving it much later would threaten to undermine the UK’s revival from recession.

The Bank’s rate has been at 5.25% since last August when the last of 14 consecutive hikes was ordered by the MPC to rein in an inflation boom triggered by severe post-pandemic supply constraints and the energy price explosion caused by the war in Ukraine.

The MPC next meets to make a decision on rates on March 21 but it is thought highly unlikely that a vote to cut will be made then. Yesterday’s wages figures from the Office for National Statistics showed basis pay rising at an uncomfortably fast 6.1% in the November to January quarter.