BoE inches closer to rate cut as second policymaker backs easing

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The Bank of England (BoE) moved closer to cutting interest rates from a 16-year high after a second policymaker voted for lower borrowing costs and Governor Andrew Bailey said he was “optimistic that things are moving in the right direction.”

Deputy Governor Dave Ramsden joined external member Swati Dhingra in calling for an immediate cut in the base rate from its current level of 5.25%, where it was held for the sixth straight meeting.

The other seven members of the Monetary Policy Committee preferred no change, saying they needing more evidence that inflation will be subdued.

Bailey told a news briefing after the decision was announced that the rate will likely have to be cut in coming months, and that a change as soon as June “is neither ruled out nor a fait accompli.” “It’s likely that we will need to cut bank rate over the coming quarters and make monetary policy somewhat less restrictive over the forecast period, possibly more so than currently priced into market rates.”

Gilts rose and the pound fell after the decision.

“Dissent from an internal member is rather rare and should be taken as a strong signal that the BoE are ready to cut rates,” said Michael Brown, a strategist at Pepperstone Group Ltd in London.

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