While leaving interest rates at 5.25% today as widely expected, the Bank of England gave the impression that it is close to cutting interest rates and also hinted that rates may need to fall further than investors expect. This lends some support to our view that the Bank will first cut rates at the next meeting in June and that, due to inflation falling to only 1.0% later this year, the Bank will reduce rates to 3.00% next year rather than to 3.75-4.00% as currently expected by investors. For more detailed analysis see here.
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