The ECB's interest rate cuts put pressure on the Bank of England to lower the base rate

The ECB's interest rate cuts put pressure on the Bank of England to lower the base rate

  • June bank meeting to decide whether to cut rates from 16-year peak of 5.25%
  • The latest UK inflation figures last week showed a sharp fall to 2.3% in April

By means of Jessica Clark

Updated:

Interest rates in Europe are set to be cut next week, increasing pressure on the Bank of England to follow suit.

Policymakers at the European Central Bank (ECB) are preparing to cut borrowing costs from an all-time high during their meeting on Thursday.

The decision comes ahead of a crucial Bank of England meeting in June to decide whether to cut interest rates from a 16-year peak of 5.25 percent as a boost to households.

Now that the ECB expects an interest rate cut, the Bank of England is under extra pressure

Now that the ECB expects an interest rate cut, the Bank of England is under extra pressure

Official figures last week showed British inflation fell sharply to 2.3 percent in April.

In response, Prime Minister Rishi Sunak heralded 'brighter days ahead' and said inflation was 'back to normal'.

The economy also recovered from the recession in early 2024.

Last month, the Bank of England's monetary policy committee maintained interest rates, continuing the misery for mortgage payers.

Although inflation has fallen close to the Bank's target of 2 percent, interest rates are expected to remain high until the autumn despite the ECB's measures.

Quilter Investors' Lindsay James said the ECB is “in a stronger position to look at rate cuts” because annual core inflation has fallen more than in Britain.

Investors are betting that the ECB will cut interest rates by 0.25 percentage points from a record high of 4 percent at the meeting.

Yesterday, ECB policymaker Olli Rehn said the “time is right” to start cutting interest rates next month as long as there are no more energy price increases.

What can the elections mean for your money?

The Prime Minister put an end to all speculation this week by giving us the date for the general election: July 4.

That's because the latest inflation figures were 2.3 percent, slightly above expectations, making a key rate cut next month now unlikely.

Simon Lambert, Georgie Frost and Lee Boyce delve into the state of the economy and what the upcoming election could mean for your money.

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