Interest rate cuts are “in play” this year in a win for homeowners and borrowers, according to the governor of the Bank of England.
Andrew Bailey has suggested the central bank could cut the UK’s base rate which will relieve costs on those with mortgage and debt payments.
This is primarily due to the potential risk of a wage-price spiral has diminished as of late.
Mr Bailey said he is increasingly confident the Consumer Price Index (CPI) rate of inflation is edging towards the Bank of England’s two per cent target.
Earlier this year, the Bank’s governor suggested interest rate cuts were off the table until the CPI rate fell significantly.
However, with inflation falling in February, it appears Mr Bailey is not ruling out a rate cut in the near future.
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The Bank of England boos suggest rate cuts could happen in the near future
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He cited that markets were correct to expect more than one interest rate cut this year.
Furthermore, Mr Bailey emphasised how small the technical recession last year had been.
Speaking to The Financial Times, he explained: “It’s like the Sherlock Holmes dog that doesn’t bark.
“If the second-round effects don’t come through that’s good because monetary policy has done its job.
“We have an increasingly positive story to tell on that.
“The global shocks are unwinding and we are not seeing a lot of sticky persistence (in inflation) coming through at the moment.”
Earlier this week, the Bank’s Monetary Policy Committee (MPC) agreed to keep rates at their current level for the fifth consecutive time.
Since August 2023, interest rates have remained at the relatively high rate of 5.25 per cent.
While beneficial for savers, those with mortgage and debt have been saddled with rising repayments.
The Bank of England has chosen to hike the base rate in its ongoing fight to bring down inflation, which has contributed to the cost of living crisis.
With analysts pricing in future rates, the FTSE 100 edged closer to an all-time high on Friday.
The UK’s index of the top 100 stocks reached highs of 7,960 during the day.
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The Bank of England base rate is at a 15-year high of 5.25 per cent GB NEWSHowever, the FTSE 100 was not able to surpass the 8,000 mark.
Kathleen Brooks, research director at trading platform XTB, said: “The market rally this week was driven by news that central banks have shifted to a more dovish stance.
“At the Bank of England, Catherine Mann and Jonathan Haskel, the two remaining hawks at the Bank who had been voting for more rate hikes, changed their tune and opted for rates to remain on hold this month.
“The dovish shift in the Bank vote split is seen as a major step towards cutting rates later this year.
“The market now thinks that the first rate cut will come in June, and that there will be three rate cuts this year.”
