Election will kill off chance of interest rate cut in June, former BoE chief says

Michael Saunders, who was a member of the Bank of England's MPC, says the General Election and inflation figure kill off any chance of a rate reduction until August.

michael saunders interest rate

There is a ‘zero chance’ of an interest rate cut in June because of the General Election and higher than expected inflation figure.

That’s the prediction of a former member of the Bank of England’s Monetary Policy Committee Michael Saunders, who said a rate reduction will not now happen until August.

But he did also say there will probably be three rate cuts this year.

Snap election

Saunders, a senior economist and adviser at Oxford Economics, made his comments after Prime Minister called a snap election on 4 July.

The election announcement was the same day that the inflation figure was revealed to be 2.3%, which was higher than the 2.1% economists had predicted.

The MPC would be especially reluctant to do a surprise rate change during an election campaign.”

“They themselves [the MPC] wouldn’t want to be a cause of volatility,” he told Bloomberg.

“The MPC would be especially reluctant to do a surprise interest rate change during an election campaign,” he said.

Ruled out

“But, in practice, a June rate cut is already ruled out by inflation figures. I would still say [there will be] three rate cuts – the first one not until August, and then a couple more later in the year.”

The Bank of England held the interest rate at 5.25%, a 16-year high, at its most recent meeting earlier this month.

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