| Hi there, I'm Ailbhe Rea, a Bloomberg UK Associate Editor and Readout author. Hope you enjoy today's newsletter. Soon, but not yet. That was the message from the Bank of England this afternoon, as it voted to hold interest rates steady at 5.25%. In his remarks after the vote, Governor Andrew Bailey gave the clearest indication yet that a rate cut is coming soon, saying one is likely "over the coming quarters" and we could see "possibly more" easing "than currently priced into market rates." For someone who has previously been reluctant to comment on market expectations, it's a significant indicator. Another big clue is how Dave Ramsden, deputy governor of the Bank of England, voted today. He changed his mind in favor of an immediate cut, becoming the second member of the nine-strong Monetary Policy Committee to enter the dovecote, as Helen Chandler-Wilde put it in this newsletter yesterday. While the seven colleagues of Ramsden and fellow dove Swati Dhingra voted for no change, Ramsden's vote is being taken as a strong signal that the Bank will cut soon, given he is an internal member of the MPC — and because where he has led other committee members have followed in the past. The pound reflected that expectation today, falling to a two-week low. What's more, that cut could come as soon as next month, with markets now judging a June cut more likely, giving it a 50% chance.  Andrew Bailey at today's news conference. Photographer: Hollie Adams/Bloomberg It's all good news for Jeremy Hunt, who this afternoon told reporters that: "What we want is sustainably low interest rates, and I think what's encouraging is that the Bank of England governor, for the first time, has expressed real optimism that we're on that path." Whether it comes in August or even sooner, an interest rate cut is what he and Rishi Sunak have been banking on to see something of an improvement in the economy — and therefore the polls — ahead of the general election.
The Bank also upgraded its growth forecasts, estimating that last year's shallow recession has finished and that the economy will grow 0.5% this year and 1% in 2025. That's an upgrade from its February forecast for 0.25% and 0.75%. The Bank attributed some of that to population growth, but some of that to Jeremy Hunt's own interventions, such as the cut to national insurance in the last budget. For Conservatives keen to make the argument that "the plan is working," they could hardly have asked for a better report from the Bank today. So it's no wonder Rachel Reeves pre-empted today's news with a speech earlier in the week, saying that the Tories' suggestions that the feel-good factor is returning are "completely out of touch with the realities on the ground." With inflation falling but still above target, that's what both parties are waiting anxiously to see — how these brightening economic forecasts do, or don't, resonate with people in their real lives.
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