Economic Experts Predict BoE Rate Cut as UK Inflation Drops to 2%
The recent drop in the UK inflation rate marks a significant achievement for policymakers. For the first time in almost three years, the present inflation rate aligns with the Bank of England's (BoE) long-term target of 2%.
This observation has triggered widespread speculation from economic experts who see the possibility of the BoE cutting interest rates within the year. Such a move could have profound implications for the economy and potentially drive increased adoption of cryptocurrencies in the UK.
UK Inflation and Market ImpactData released on Wednesday shows that the UK Consumer Price Index (CPI), measured annually, recorded a 2.0% rise in May 2024. This is a positive movement compared to the 2.3% seen in April.
It is also considered the best inflation rate since July 2021, meeting the BoE's target to maintain price stability and sustain economic growth. On a monthly basis, the CPI displayed 0.3% growth in May, slightly below the predicted 0.4%.
Notably, the Office for National Statistics (ONS) believes that changes in food and fuel prices have significantly impacted inflation in the UK. They highlighted that lower food prices this year compared to last year helped bring down the overall inflation rate for the month.
On the other hand, slightly higher motor fuel prices contributed to inflation going up slightly. Moreover, Core inflation, excluding volatile items like energy and food, decreased from 3.9% to 3.5% annually.
This change matches experts' predictions and shows that inflation is easing in the UK and other countries, such as the United States.
This outcome comes after the UK saw a peak inflation rate of 11.1% in October 2022, the highest since 1981. To control this, the BoE started raising interest rates in December 2021, reaching a peak of 5.25%. The goal was to stabilize prices and the economy.
Meanwhile, even though inflation has slowed down recently, there's uncertainty about the BoE's next move. Many experts think the BoE will keep interest rates the same in its upcoming meetings.
However, if inflation keeps going down, there's the belief that the BoE might lower rates starting as early as August.
Interest Rate in the Crypto WorldAnalysts and investors see lower interest rates as good news because they make borrowing cheaper, which can boost spending and investment. It could benefit not just traditional financial markets but also newer sectors like digital assets.
Bitcoin could gain value if the BoE decides to lower interest rates. When central banks lower interest rates, traditional currencies often lose value, making other investment options, like digital assets, which no central body controls, more attractive.
In addition, lower interest rates make it cheaper for people and businesses to borrow money. That extra money can flow into riskier investments, including cryptocurrencies, potentially driving up their prices.
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