Interest rate cut more likely in August than next month, economists say

A majority of economists are predicting a Bank of England interest rate cut in August rather than next month,

There are hopes the Bank’s Monetary Policy Committee and Governor Andrew Bailey (main picture) will reduce the base rate from its current 16-year high of 5.25% when it announces its next decision on 20 June.

In a split vote earlier this month, the committee decided by 7-2 to retain the same rate.

Mortgage rates cut

Some lenders have decided to reduce their mortgage rates as expectations increase of a Bank rate cut.

HSBC, Barclays and TSB have all lowered mortgage borrowing costs in the last week.

The latest Rightmove tracker shows rates are still higher than last year though. The average 5-year fixed mortgage rate is now 5.02%, up from 4.59%, and the 2-year fixed rate is now 5.42%, compared to 4.92%.

August more likely

Thirty-eight of 71 economists polled by news agency Reuters expect a Bank cut to 5% in August, Sky News reports, with 31 going for June and two for September.

The BoE is unlikely to feel the need to rush into cutting interest rates.”

Dean Turner, Chief Eurozone and UK Economist at UBS Global Wealth Management, said: “The reason I’m currently leaning a little bit more towards August rather than June is that with signs the economy is doing okay, the BoE is unlikely to feel the need to rush into cutting interest rates.

“They have time to ensure further progress on services inflation and wage pressures.”

The latest inflation figure will be announced on Wednesday, with many predictions of it falling close to the Government’s target of 2% from its current level of 3.2%.