Economists predict that the Bank of England may start cutting interest rates to 5% in June, while an unexpected job surge in Australia leads to a reassessment of a potential rate cut by the Reserve Bank of Australia.
Economists are predicting that the Bank of England may begin to cut interest rates as early as June, with expectations for a reduction to around 5% at the forthcoming meeting. Despite maintaining rates at 5.25% recently, analysts anticipate a shift, potentially to 4.25% by the end of the year, influenced by upcoming data such as April’s inflation figures and the impact of the minimum wage increase.
In contrast, in Australia, an unexpected drop in unemployment from 4.1% to 3.7% in February has led to a reassessment of the likelihood of an interest rate cut by the Reserve Bank of Australia (RBA). The creation of 117,000 jobs in February, marking the largest monthly increase in a decade, has decreased the probability of an August rate cut from 80% to 60%. This job market resilience has prompted some analysts to caution against over-optimism, highlighting the volatile nature of labour force surveys.
The Bank of England’s potential move towards rate cuts stems from various economic indicators and the impact of energy price cap adjustments, with economists like ING’s James Smith and Rob Wood from Pantheon Macroeconomics forecasting a gradual reduction in rates. Meanwhile, the RBA’s decision-making process remains focused on balancing economic growth with price stability, amidst fluctuations in the Australian job market and upcoming inflation data.
Overall, both the UK and Australia are at pivotal moments regarding interest rate decisions, with economic data playing a crucial role in shaping the monetary policies of their respective central banks.
