- Bank meeting in June to decide whether to cut rates from 16-year high of 5.25%
- The latest UK inflation figures from last week showed a sharp drop to 2.3% in April.
Interest rates in Europe are scheduled to be cut next week, increasing pressure on the Bank of England to do the same.
European Central Bank (ECB) policymakers are preparing to cut borrowing costs from a record high when they meet on Thursday.
It comes ahead of a crucial Bank of England meeting in June to decide whether rates should be cut from a 16-year high of 5.25 per cent in a boost for households.
With the ECB planning to lower interest rates, the Bank of England faces additional pressure
Official figures last week showed UK inflation fell sharply in April to 2.3 per cent.
In response, Prime Minister Rishi Sunak announced that “brighter days are ahead” and claimed that inflation was “back to normal”.
The economy also recovered from the recession in early 2024.
Last month, the Bank of England’s monetary policy committee left rates unchanged, prolonging the misery of mortgage payers.
Although the inflation rate has fallen close to the Bank’s 2 percent target, borrowing rates are expected to remain high until the autumn despite the ECB’s move.
Quilter Investors’ Lindsay James said the ECB was “in a stronger position to consider rate cuts” as annual core inflation has fallen more than in the UK.
Investors are betting the ECB will lower rates by 0.25 percentage points from a record high of 4 percent at its meeting.
Yesterday, ECB policymaker Olli Rehn said “the time has come” to start cutting rates next month, as long as there are no further rises in energy prices.