BOE Poised for Rate Cut Amid Growth Concerns, Diverging from Fed’s Stance

The Bank of England is expected to cut interest rates by 25 basis points to 4% this week, marking its second consecutive easing MOVE as the UK economy grapples with weak demand and rising unemployment. This dovish pivot contrasts sharply with the Federal Reserve's steady stance, highlighting a growing transatlantic policy divide.

Britain's economic fragility has deepened since the Labour government's budget introduced significant payroll tax hikes and wage increases, prompting employers to pull back on hiring. Two quarters of GDP contraction now outweigh inflation concerns for MPC members, even as price growth hits a 17-month high.

Governor Andrew Bailey maintains the inflation spike is temporary, but Thursday's decision will be accompanied by revised forecasts that may force acknowledgment of persistent price pressures. "The BOE walks a tightrope," says one London trader. "Growth demands stimulus, but their credibility can't withstand another inflation miss."