The Bank of England keeps its key rate unchanged in the middle of the election campaign

>> United Kingdom: The Central Bank maintains its key rate at 5.25%

>> British inflation slows to 2%, Bank of England target

“It is good news that inflation has returned to our 2% target,” judged Thursday June 20 the governor of the British central bank, Andrew Bailey, but “we must ensure that inflation remains low and that is why we have decided” to leave the rate at 5.25% “For now”.

As economists expected, given the general elections scheduled for July 4 in the United Kingdom, the British central bank kept the key interest rate at its highest level since 2008.

Just after the announcement that the elections would be held at the beginning of July, the BoE canceled almost all of its members’ speeches, so as not to appear to want to influence the outcome of the vote, for which the conservative government of Rishi Sunak is falling well behind the Labor opposition, according to polls.

In the minutes of its meeting, the BoE however assured that “the date of the election was not taken into account in this decision” from Thursday June 20.

Like the previous decision, only two members of the BoE’s Monetary Policy Committee voted in favor of a rate cut, with the other members favoring maintaining it.

This is the institution’s seventh status quo in a row. Analysts wonder if it is the latter.

Decision “finely balanced”

“The market sees this announcement as a step towards lowering rates in the next BoE decision,” in August, notes Kathleen Brooks, XTB analyst.

Ruth Gregory, of Capital Economics, notes that “even for some supporters of the no-change camp” within the Committee, “the June decision was +finely balanced+” to the extent that inflation in service prices recently emerged higher than expected would reflect “punctual effects” more than background factors.

Furthermore, the minutes of the meeting indicate that “Indicators of inflation persistence continued to moderate.”

Inflation fell to 2% year-on-year in the United Kingdom in May, for the first time in three years.

The British central bank still forecasts that inflation “increases slightly in the second half of the year”, while the fall in energy prices moderates, before falling again more sustainably.

However, she notes that there remain “upward risks to the short-term inflation outlook linked to the geopolitical context”, with the crisis in Ukraine threatening the energy market, as well as a possible extension of the conflict between Israel and Hamas.

The BoE has also raised its forecasts for economic growth in the United Kingdom, now estimated at 0.5% in the second quarter, more than the 0.2% projected in its May report.

Long the highest of the G7 countries, British inflation is now lower than that of the United States and the euro zone, and far from the more than 11% reached at the end of 2022, which had generated a strong purchasing power crisis. UK.

Earlier Thursday, June 20, the Swiss National Bank (SNB) again reduced its key rate by a quarter of a point, to bring it to 1.25%, in the face of lower inflation than in many countries.

For its part, the Bank of Norway on Thursday, June 20, unsurprisingly kept its key rate at 4.5%, and plans to maintain it at this level until the end of the year.

Earlier in June, the European Central Bank (ECB) began its rate cut cycle.

Around 3:30 p.m. GMT (5:30 p.m. in Paris), the British currency accelerated its losses against the greenback, losing 0.35% to 1.2675 USD per pound.

The Swiss currency fell by 0.71% against the dollar, to 0.8906 Swiss francs per dollar.

AFP/VNA/CVN