City investors are increasingly betting on a potential interest rate cut by the Bank of England in September, with a 45% chance of a cut to 4.75%. This comes after data showed inflation rose less than expected in July to 2.2%. Prior to this, a rate cut in September was only a 36% probability. Traders now expect two rate cuts by the end of the year. Service sector inflation also slowed to 5.2% last month, lower than anticipated.
Despite the inflation rise, some experts believe the Bank is unlikely to cut rates in September. The chief secretary to the Treasury, Darren Jones, emphasized the current government’s commitment to addressing the cost of living challenges faced by families. Pierre Roke, an associate at Validus Risk Management, also suggested that two rate cuts might be possible this year based on the inflation report.
The price of hotels saw a monthly decline in July, potentially influenced by pop star tours. The pound dropped in response to the inflation data, as bets on further rate cuts increased. Overall, while some predict a rate cut in September, others believe the Bank may exercise caution given the current economic conditions. Ultimately, the decision on interest rates will have to balance inflation concerns with the need to support economic growth.
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