Bank of England Holds Rates Steady but Signals Gradual Easing

Published On Sep 19, 2024, 7:19 AM

The Bank of England has decided to maintain interest rates at 5% while indicating a gradual approach to future rate cuts. Inflation has significantly slowed, but the central bank is cautious about making cuts too quickly, given persistent high inflation in specific sectors like services. Policymakers anticipate a slight rise in inflation due to increasing household energy costs before decreasing to the bank's target of 2% by early 2026. They also predict a gradual increase in unemployment over the next two years, peaking at 4.8%.

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As the Bank of England indicated that they would approach rate cuts very cautiously and keep rates steady for the foreseeable future, this is likely to have a mixed impact on the UK stock market. Certain sectors, particularly those sensitive to interest rates, may react positively as the expectation of gradual cuts and controlled inflation could encourage spending and investment. However, the cautious approach may lead to uncertainty among investors, negatively impacting market sentiment.

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