TraderKnows reports persistent UK inflation per Bank of England’s Huw Pill; August rate cut likelihood drops below 50%.

LONDON, UK, July 18, 2024  — In a recent statement, Huw Pill, Chief Economist at the Bank of England, highlighted that inflation in the UK remains stubbornly persistent. This announcement has led traders to reduce their bets on the central bank cutting interest rates by 25 basis points on August 1, with the probability of a rate cut falling below 50% for the first time in approximately three weeks. Pill mentioned that the question of a rate cut is “when” rather than “if,” but also indicated ongoing concerns about persistent price and wage pressures.

Pill’s colleague, Jonathan Haskel, suggested earlier this week that he would vote to maintain rates at a 16-year high, further decreasing the likelihood of a rate cut and causing the market to adjust its expectations. The pound continues to strengthen against the dollar, currently trading at 1.2856.

Neil Jones, a foreign exchange salesperson at TJM Europe, commented, “It looks unlikely that Pill will vote for a rate cut in August. There are clear concerns about the upside risks of inflation.”

Despite UK inflation returning to the central bank’s 2% target, inflation in the service sector and wage growth remain strong. Analysts at ANZ Bank noted, “Before the Bank of England’s meeting on August 1, the MPC will only have one more set of data to reference. One set of data may not be enough for the MPC to gain confidence in the inflation path, and the MPC may prefer to wait for more data. We believe that with improvements in summer data, the MPC’s confidence in cutting rates in September will increase.”

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