UK interest rates left on hold at 5.25% in ‘finely balanced’ decision – business live

From 1h ago 08.01 EDT Pound falls as City braces for August rate cut Sterling is weakening on the foreign exchange markets, as traders anticipate that the Bank of England may cut interest rates in August. The revelation that today’s decision to hold rates was “finely balanced” has knocked the pound, which has lost a third of a cent to $1.268 against the US dollar. The market reaction has been “swift”, says Kathleen Brooks, research director at XTB, as the City has taken today’s news as “a step in the direction of a rate cut at the next BOE meeting”. The money markets now suggest there’s a 45% chance of a rate cut in August, versus a 55% chance of no change (this pricing is changing, though!). Brooks explains: To sum up, the BOE’s statement and minutes have kept ajar the door for an August rate cut, as they have acknowledged the progress made on inflation to reach the 2% target. Although they remain committed to inflation returning sustainably to the 2% target rate, they did give some decent excuses for the elevated levels of service price inflation, including prices that are set annually and other indicators that suggest wage growth could ease in the coming months. The market is taking this as a dovish sign, and are increasing their bets for an August rate cut. Share Updated at 08.16 EDT4m ago 08.56 EDT The BBC’s economics editor, Faisal Islam, has some fascinating detail about today’s interest rate decision. His understanding is that there were three members of the MPC whose decision to vote to hold rates today was ‘finely balanced’ (as the Bank put it earlier). That would have made a majority, he points out,

if they had allied with Swati Dhingra and Dave Ramsden who did vote to lower rates, but were outvoted 7-2. This means the pathway to a cut on 1 August seems “pretty solid”, Islam says. Intriguingly, he adds that the group of three waverers “probably includes” Andrew Bailey, the governor of the Bank of England, and “probably” deputy governor Ben Broadbent too. Broadbent steps down at the end of this month, though, and will be replaced by the OECD’s Clare Lombardelli. Here’s a video clip with more details: My take on the Bank of England’s close run decision to hold, pointing to a cut on August 1st…Taking full advantage of the newly pedestrianised Threadneedle Street… pic.twitter.com/2l7mwFq9Da — Faisal Islam (@faisalislam) June 20, 2024 Sliding doors moment for the Conservatives – with a lower services inflation print on the day Sunak called the election, he may well have got a rate cut 2 weeks before polling day… — Faisal Islam (@faisalislam) June 20, 2024 Share Updated at 08.57 EDT17m ago 08.43 EDT ING: Bank of England hints that the first rate cut is drawing nearer It is clear the Bank of England is getting closer to the point of cutting rates, says James Smith, developed markets economist at ING. He told clients today: Assuming the next inflation report in mid-July doesn’t contain any nasty surprises, we still think the Bank will vote for a rate cut in August. Today’s meeting suggests that the BoE is in a similar mindset to the ECB, where it is getting more confident in its inflation forecasting ability and therefore feels able to look through temporary gyrations in underlying CPI data. Bank officials

are heavily constrained in what they can say during the current election campaign. But Governor Andrew Bailey said in May that the Bank may end up cutting rates further than markets were pricing at the time, a rare signal aimed at investors. Watch out for any speeches getting put into the calendar just after the UK election on 4 July, where officials like Bailey or his deputy governors/chief economist might look to firm up expectations for a summer cut. Share26m ago 08.33 EDT Ocado shares slide after Vancouver warehouse put on hold Sarah Butler Away from the Bank of England, shares in Ocado have dived over 10% after the company said that its Canadian supermarket partner Sobeys had paused plans to expand its online shopping business with the British firm. Only a few weeks after being dumped from the FTSE 100, Ocado told the City that Empire Company Limited, owner of Sobeys, is pausing plans to open its fourth online shopping warehouse. The warehouse, powered by Ocado technology, was set to open in Vancouver next year. Ocado faces FTSE 100 relegation after failing to deliver on pandemic promise Read more The two companies are also ending a deal under which they promised to exclusively work with each other on online shopping in Canada. Sobeys currently has three live warehouses using Ocado technology in Toronto, Montreal and Calgary which also supports the retailer serving online customers from almost 100 stores. Ocado said the two companies “have decided for now to focus their joint resources into driving order and sales volumes across the current network.” Ocado said its expectations for full year sales and profit this year remaine