Mortgage interest rates warning over speed of any cut decision from Bank of England
Experts believe that the Bank of England is "gradually" moving towards cutting interest rates.
Andrew Bailey explains decision to hold interest rates at 5.25%
The Monetary Policy Committee (MPC) is "gradually" moving towards an interest rate cut but that will mean further pain for mortgage holders before it gets there, experts have warned.
At the last meeting in March, just one member of the MPC, Swati Dhingra, voted for rates to be cut by 0.25 percentage points, but the remaining eight members voted for no change.
Philip Shaw, chief economist at Investec, said: "This broad direction illustrates that collectively the committee is moving gradually towards a rate cut.
"It seems unlikely though to be ready to bite the bullet just yet and the Bank rate looks set to remain on hold at 5.25 percent for the sixth consecutive meeting."
He added that it is possible that a second member of the MPC will switch to the "easing camp" and vote for a cut on Thursday.
Althea Spinozzi, Head of Fixed Income Strategy at Saxo, said: "While the BOE is exploring opportunities to begin reducing interest rates, this week’s Monetary Policy Committee (MPC) meeting will likely show that the rate cut cycle ahead remains uncertain.
"Even if the Bank of England pre-commits to a rate cut this summer, it is unlikely to announce further cuts soon, especially given the uncertain monetary policy trajectories of the European Central Bank and the Federal Reserve.
"This leaves UK monetary policy decisions heavily reliant on upcoming economic data.
“At the last MPC meeting, the BOE members decided by an 8-1 majority to maintain interest rates unchanged. In this meeting, it wouldn’t be surprising if the vote split adjusts to 7-2.”
Ms Spinozzi has highlighted how there are challenges to early and aggressive BOE rate cuts while core and service inflation remains elevated 4.2 percent and six percent respectively and wages are still growing six percent year on year.
Analysts widely expect a freeze at 5.25 percent today, as inflation holds steady at 3.2 percent and GDP showed signs of improvement in the first quarter. Others have suggested this decision could lead to "deflation or a recession".
The Institute of Economic Affairs, a group of independent economists who shadow the Bank of England, has called for interest rates to be cut substantially and immediately.
