Citigroup predicts the Bank of England (BoE) will reduce interest rates this year, with the first cut likely in June instead of August as previously anticipated, Reuters on Wednesday. Citi economists stated in a note dated March 12 that weak economic activity and soft labour market indicators are likely to prompt the Monetary Policy Committee (MPC) to start cutting rates by the end of Q2. The Wall Street brokerage expects the BoE to reduce rates by 125 basis points in 2024, but did not specify the number of rate cuts. Recent data revealed slow wage growth and a higher unemployment rate, which may alleviate the central bank's inflation concerns. Citi economists believe wage growth aligns with BoE expectations for the private sector, while service sector inflation may fall short of projections by 10-20 bps before potential rate cuts in June. Citi noted that an August rate cut is still possible if second-quarter inflation data proves more resilient. The BoE anticipates inflation returning to its two per cent target in Q2 before rising towards three per cent later in the year due to energy prices and wage costs.
