US rate cut will not be matched by Bank of England
Share:
The US central bank has announced an interest rate cut, just hours before the Bank of England is tipped to refrain from following suit. The Federal Reserve cut its main funding rate by a quarter point to a new target range of 4.25%-4.5%, as markets had expected, but signalled that future reductions would happen more slowly.
A resurgence in the pace of inflation is a big worry, with the prospect of new trade tariffs under Donald Trump from 20 January also risking a leap in the pace of US price growth in the New Year as imported goods would cost more. Money latest: Most pension credit claims made recently have been denied.
Data on Tuesday showing resilient consumer spending among other reasons for Fed policymakers to be wary of inflation ahead. The Federal Open Markets Committee expected two rate cuts in 2025. Market expectations had been for four just weeks ago. As a result government bond yields, which reflect perceived future interest rate paths, ticked upwards.
Rent prices reach record high in England. Inflation rises for second month in a row. Money blog: BrewDog millionaire raises eyebrows as he considers delaying marriage to Georgia Toffolo for tax relief. The dollar also found support, gaining 0.5% against both the pound and euro.
The Fed's rate decision was announced just hours before the Bank of England gives its own verdict. No rate cut is expected while financial markets are expecting a similar message on the possible interest rate path ahead. UK yields - the effective cost of servicing government debt - have moved sharply higher this month, with the gap between British and German 10-year bond yields rising to its highest level in 34 years earlier on Wednesday.
