Bank of England Moved Closer to a Pivot, but June Cut Not Fait Accompli

Boe Policy Decision

The Bank of England kept rates at 5.25% for sixth straight meeting, but appears to move closer to a pivot. The 7-2 vote count showed that now two members voted against the majority to cut by 0.25%, from just one in March. Furthermore, officials lowered their inflation forecasts, which is projected to fall below the 2% target in two years, much faster than before (Q1 2027).^[1]

During the press conference, Governor Bailey pointed to rate cuts and less restrictive stance ahead, but did not embrace nor dismiss speculation for a move as early as June. In typical non-committal BoE fashion, he said that such move is "neither ruled out nor a fait accompli", sustaining the uncertainty around the timing.^[2]

On the other hand, the updated projections are conditioned on much higher market implied path that goes as low as 3.4% in 2026 (from 3.4% previously) and suggest 45 basis points of cuts this year. This makes a move so early look like a bit of a stretch, but the bank has surprised before, especially with its lift-off in late-2021.

The European Central Bank looks like a better candidate to pivot first, while its Swiss and Swedish counterparts have already lowered rates. The US Fed has turned cautious around removing monetary restraint due to persistent price pressures and markets don't expect a move until after the summer.