Expectations of early rate cut from BOE strengthen

The fact that two hawkish members of the Bank of England have chosen to skip the election has caused markets to price in an early rate cut. Investor pricing, data forecasts and the UK election calendar all suggest that the first rate cut could occur in June. “The needle is pointing to the bank moving faster than we thought — June instead of August,” said Nomura Economist George Buckley, who argued that the BOE had paved the way for a rate cut with its guidance yesterday. With falling natural gas prices, UK inflation could fall back to the BOE’s target of 2% in April. “Core inflation and even the factors that cause BOE members concern are starting to look more moderate,” said Martin Beck, Chief Economic Advisor at EY Item Club. And as the election approaches, ruling Conservative Party MPs are increasing pressure on the bank to reduce mortgage costs.