BoE rate futures to see first cut in August

Interest rate futures were fully factored in on Monday in an initial quarter-point interest rate reduction by the Bank of England (BoE) for August, with expectations of a second cut before the year’s end. This marks an earlier commencement of cuts that was predicted last week Reuters reported.

As of 07:45 GMT, rate futures indicated a 25 basis point cut by the BoE’s meeting on August 1 and a 54 basis point cut by December 19. This is a significant increase from Friday afternoon’s predictions of 17 and 42 basis points, respectively.

Meanwhile, two-year gilt yields dropped to a one-week low of 4.367 per cent at 07:41 GMT, a decrease of 2 basis points on the day.

Last week, financial markets scaled back expectations for BoE rate cuts due to slightly higher than anticipated British inflation and a shift in US Federal Reserve cut expectations.

However, BoE Deputy Governor Dave Ramsden, in his remarks in Washington late on Friday, stated that it is now plausible that British inflation could reach and maintain its 2 per cent target, a figure lower than earlier BoE forecasts.