Morning Market Brief: June 21, 2024

BoE holds steady, at least for now?

In the UK, the Bank of England (BoE) held steady at its meeting yesterday. While some others, such as the Bank of Canada and European Central Bank, have decided to begin lowering rates, the BoE believes its key rate is at an appropriate level to help bring inflation down further. Still, the BoE is seeing signs in economic data that a rate cut might be warranted at an upcoming meeting.?

• The BoE held its policy interest rate steady at 5.25% at its June meeting. This keeps its interest rate at its highest level since 2008. Among nine BoE officials, seven elected to hold rates steady, while two elected to begin reducing interest rates.
• Inflation remains a concern, despite reaching the BoE’s 2% target in May. Officials noted they would like more evidence that inflation risks are minimized before beginning to cut interest rates.
• However, the BoE might not be that far away from starting to lower interest rates. Inflation is moderating, economic growth has waned in recent quarters, and the labour market is showing signs of softening. These insights about the UK economy from the BoE suggest a rate cut might be nearing.
• The pivot to lower interest rates globally appears to be taking shape. Inflation has come down and economic growth has faltered, which is making central banks consider the need to help stimulate their respective economies. Inflation does, however, remain an ongoing risk, suggesting rate cuts might be gradual.

While holding steady at this meeting, the BoE seems primed to begin lowering interest rates in the third quarter, following some other major central banks. The move would be expected to help stimulate consumer and business activity in the UK. Canada has already seen the beginning of the pivot to interest-rate cuts, which might help stimulate consumer demand and support stronger demand in the real estate market.

At?CIBC Private Wealth, we aim to take a comprehensive approach to managing, building and protecting your wealth. If you'd like to discuss this market and economic update in more detail, please get in touch with your advisor any time.