CNBC: Bank of England hints at rate cuts as economy weakens and inflation remains stubborn
CNBC July 1 report, Bank of England Governor Andrew Bailey clearly stated today that "the interest rate path will continue to gradually decline," sending a signal for rate cuts. Economists generally expect a 25 basis point cut at the August meeting, reducing the benchmark interest rate from the current 4.25% to 4%. However, Bailey emphasized the need to observe signs of relief in inflation pressure, especially noting that the inflation rate in May remained as high as 3.4%—far exceeding the central bank's 2% target, and 70% higher than the eurozone's 2% inflation rate in June. Chancellor Rifs admitted that the latest economic data "is obviously disappointing," and after the unexpected contraction in the UK economy in April, the government is striving to boost growth. Faced with a surge in debt interest and weak tax revenue, Rifs adheres to the fiscal rule of "not borrowing to pay daily expenses." Economists point out that tax increases have become the only realistic option for the government. Although Bailey avoided discussing specific policies, he called for the fiscal framework to retain "appropriate flexibility" to leave room for economic recovery.
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