Bank of England Should Tailgate the ECB, Not the Fed
UK policymakers should use this week’s monetary policy meeting to flag that a rate cut is likely next month.
Time to prepare the ground for a cut in interest rates.
Photographer: Oli Scarff/Getty Images EuropeThe Bank of England's policy meeting on Thursday is unlikely to deliver any change in monetary policy — but that doesn't make it unimportant. Policymakers are likely to prepare the ground for a 25 basis-point cut from 5.25% at their June 20 meeting, adopting the playbook the European Central Bank established by using its April 11 meeting to effectively promise a reduction in euro rates next month.
While central bank moves aren’t coordinated, they prefer not to operate in isolation. The ECB’s anticipated move on June 6, with even the hawkish members of its Governing Council falling into line, will provide useful cover for a BOE easing a fortnight later. This week sees a quarterly UK monetary policy review that’s expected to include downward revisions to the central bank’s inflation forecasts, bolstering the argument for lower rates.