BOE Doubles Down on Rate Cuts as Economic Storm Clouds Gather

The Bank of England is sharpening its scissors—again.

### Desperate Measures for Desperate Times

With recession whispers turning into shouts, Threadneedle Street looks set to slash rates while crossing its fingers. Because when in doubt, central bankers reach for the only tool in their box—even if it's the monetary policy equivalent of a rusty hammer.

### The Domino Effect

Watch pension funds scramble as yields compress further. Savers? They'll keep getting punished for the crime of prudence. Meanwhile, crypto markets lick their chops at yet another injection of cheap fiat—the ultimate 'risk-on' enabler.

Here we go again: financial repression dressed up as economic rescue. At least Bitcoin's hard cap doesn't bend to bureaucratic panic.

BOE weighs growth risks against inflation 

The BOE’s dovish stance comes on the back of two consecutive quarters of GDP contraction and a marked decline in hiring activity. Reacting to the Labour government’s first budget, employers have dialed back workforce expansion after being hit with a £26 billion ($34.5 billion) payroll tax hike and a sharp minimum wage increase.

BOE Governor Andrew Bailey has repeatedly signaled a preference for gradual easing, maintaining that the inflation surge is likely temporary. Still, Thursday’s meeting will coincide with the release of a fresh set of quarterly forecasts—updated from May, when officials underestimated price momentum.

“We think the central bank will be cautious about signaling more rate cuts are in the offing – inflation has surprised to the upside and price expectations are elevated,” said Dan Hanson, Chief UK Economist at Bloomberg Economics.

Markets will be watching closely for any cues on the BOE’s bond portfolio plans. With the next quantitative tightening (QT) decision due in September, speculation is growing that the central bank might scale back active gilt sales amid recent volatility in long-dated UK bond yields.

Global central banks diverge on rates as trade pressures mount

The BOE isn’t the only central bank in action this week. Mexico’s Banxico is expected to deliver its ninth consecutive rate cut, bringing its benchmark rate to 7.75%, despite newly extended US tariffs. On the other hand, Lesotho’s central bank is forecast to reduce its rate to 6.75%, responding to severe export losses under the TRUMP administration’s trade policy.

In contrast, the Czech Republic, Serbia, and Romania are holding steady rates in light of mixed inflation and fiscal signals.

In the US, fresh trade data on Tuesday is expected to show a narrowing goods-and-services deficit for June, after months of import declines. Services PMI from ISM will also give insight into the strength of the largest segment of the American economy.

The July jobs report disappointed markets, and Fed Chair Jerome Powell held rates steady, citing persistent economic uncertainty. With Fed Governor Adriana Kugler announcing her early resignation, attention is now turning to who the WHITE House might tap to replace her—and potentially succeed Powell in May.

Global markets react as trade tensions and inflation data drive rate decisions

Across Asia, a flurry of economic reports will shed light on how the region is coping with Trump’s Aug. 1 tariff escalation. Inflation updates from South Korea, the Philippines, Taiwan, and Thailand are expected to show mostly contained pressures, giving room for more rate cuts.

The second-quarter GDP from Indonesia and the Philippines will be closely watched, while export data from Vietnam, Australia, and China may reflect pre-tariff acceleration. A key chip exporter, Taiwan, will cap the week with fresh trade figures.

In Europe, industrial and trade reports from Germany, France, Italy, and Spain could lead to revisions in GDP. Eurostat confirmed 0.1% quarterly growth for the eurozone in Q2. Meanwhile, Switzerland faces fallout from Trump’s 39% tariff, and inflation is expected to remain at 0.1%.

Swedish inflation is forecast to surge past 3% on the CPIF measure, likely delaying further monetary easing. In Turkey, inflation may ease to 34% annually despite new price hikes, while the central bank remains on track to cut rates in September.

Mexico’s central bank is poised for a 25bps cut in Latin America, its ninth straight, amid slowing inflation. Brazil, by contrast, is expected to remain on hold at 15%, with easing not likely before 2026.

Colombia, facing fiscal strain and sticky inflation, will release its quarterly inflation report and central bank minutes. At the same time, CPI data from Chile and Mexico will help shape the region’s policy outlook.

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