The Bank of England cut its policy rate by 25 basis points to 3.75%, marking the fourth reduction of the year as weaker growth, softer labor conditions, and fast disinflation reshaped the policy outlook.
The decision was passed by a 5-4 vote within the Monetary Policy Committee, emphasizing how finely balanced the debate has become. While inflation is moving lower, it remains above the 2% target, keeping policymakers cautious even as economic momentum fades.
Despite the rate cut, the Bank avoided signaling a shift toward rapid accommodation. Officials stressed that inflation progress alone does not justify aggressive easing, emphasizing that future decisions will hinge on inflation expectations, wage trends, and overall economic stability. The message was clear: policy flexibility remains intact, and further moves will depend strictly on incoming data rather than a preset path.
The Bank framed the current direction as a measured easing cycle, not a sequence of swift cuts. Financial conditions are expected to loosen gradually, but policymakers warned that deeper reductions in 2026 would require careful reassessment. Concerns around persistent wage growth and services inflation continue to limit how far and how fast rates can fall, even as broader activity stays fragile.
Market reaction was subdued. Sterling and the FTSE 100 traded largely flat, reflecting that the move had been widely priced in. In contrast, 10-year UK gilt yields edged slightly higher, suggesting lingering caution around future inflation risks and fiscal dynamics. Positioning continues to favor a slow, controlled easing cycle rather than a sharp policy pivot.
Looking further out, economists note that weak growth projections for late 2025 could justify additional easing if structural pressures persist. Still, the Bank remains closely focused on wage settlements and labor-market signals, which could complicate the disinflation process. For now, the latest cut represents an effort to support a softening economy without losing control of inflation, with the Bank of England’s ongoing attempt to hold that balance steady.
The dollar index slipped below 97 as markets awaited delayed January jobs data, with weak retail sales and reports of China urging banks to cut US Treasury exposure adding pressure on the currency.
The dollar index stayed under pressure on Tuesday as fears of softer foreign demand for US assets, reports of Chinese banks cutting Treasury holdings, expectations of delayed US jobs and inflation data, and a firmer yen on intervention talk weighed on the greenback.
Precious Metals Rebound (09-13 February)Global markets began the week with the US dollar under pressure, falling under 97.5 for a second consecutive session. The greenback’s decline was fueled by a combination of improved risk sentiment and expectations of stable Federal Reserve policy with potential rate cuts on the horizon. Investors remained cautious as they awaited a backlog of delayed US economic data, including employment and inflation figures.
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