BoE Rate Cut in Focus: Market Eyes on Forward Guidance and Pound Reaction
John Hall • May 8, 2025
All attention turns to the Bank of England today, with a widely anticipated 0.25% rate cut expected to bring the base rate to 4.25%—its lowest in over a year. But it’s the tone and voting split that could move markets.
Any signs of deeper cuts ahead could weigh heavily on the pound...
Key Market Takeaways:
- The Federal Reserve kept interest rates unchanged, signalling it's in no hurry to adjust policy.
- Attention now shifts to the Bank of England, with its decision expected later today.
Market Recap:
- Fed stays put: As widely anticipated, the Federal Reserve held interest rates steady. Chair Jerome Powell maintained a cautious, hawkish tone, emphasizing no immediate plans to cut rates further. He acknowledged stagflation risks but said it's too early to assess how potential tariffs might impact the outlook.
- Dollar edges up: The U.S. dollar gained modestly following the Fed’s stance and has continued to strengthen slightly into this morning’s session.
- Sterling gains on trade hopes: The British pound saw a lift during Asian trading hours amid speculation that President Trump may soon announce a UK–US trade agreement, boosting optimism for UK trade prospects.
Today’s Market Overview:
- BoE in the spotlight: The Bank of England is expected to cut interest rates by 0.25% at midday, lowering the base rate to 4.25%—its lowest level since April 2023.
- Tone matters: Investors are watching closely for a dovish message and how individual Monetary Policy Committee (MPC) members voted.
- Market impact: If the BoE hints at deeper cuts than currently priced in (markets expect rates to fall to 3.5% by year-end), the pound could face renewed downside pressure.
8th May 2025
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