The European Central Bank (ECB) cut interest rates again yesterday as hopes mounted that the UK will follow suit this summer.
Official borrowing costs in the eurozone were trimmed from 2.25 per cent to 2 per cent, the eighth such reduction since June last year.
ECB president Christine Lagarde said that with inflation now below the 2 per cent target, at 1.9 per cent, the central bank was in a ‘good position’ and that the rate-cutting cycle was ‘nearly concluded’.
That was seen as a sign that the ECB will take a break from cutting rates – at least for now.
By contrast, hopes are rising that the Bank of England will cut interest rates in the UK again in the coming months, which would be a boost to millions of borrowers.
The Bank has cut rates just four times since last summer, from 5.25 per cent to 4.25 per cent, taking a more cautious approach than the ECB.
Rate Cut: ECB president Christine Lagarde (pictured) said that with inflation now below the 2% target, at 1.9%, the central bank was in a ‘good position’
With inflation stubbornly high above the 2 per cent target – at 3.5 per cent – the chances of a rate cut this month are almost zero.
But concerns about the health of the economy, hit by Labour’s tax hikes and Donald Trump’s trade war, mean there is a near-60 per cent chance of a cut in August.
That would be a welcome relief to millions of borrowers with mortgages and businesses with loans.
Governor Andrew Bailey this week said the Bank could respond ‘aggressively’ to growing global uncertainty if required.
‘It is not always the case that you respond to uncertainty by being cautious,’ he said.
The latest move by the ECB is also likely to pile pressure on Jerome Powell, chairman of the US Federal Reserve, who has been heavily criticised by Trump for not cutting rates faster in America.
Grim jobs figures this week saw the president lash out at ‘Too Late’ Powell over his reluctance to lower borrowing costs for American households and businesses.
Official non-farm payroll data out today – a key measure of employment in the US – may prompt a further broadside from the White House.
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