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BoE cuts rates amid growth worries
The Bank of England cut rates by 25bps in a divided vote, signaling concern over slowing growth and global trade uncertainty. Meanwhile, BoJ minutes show policymakers split on whether to delay or accelerate tightening in the face of tariff-driven risks.
BoE cuts Bank Rate to 4.25% in a 5–4 vote, with policymakers split between deeper cuts and a hold.
Governor Bailey warns against overreacting to temporary inflation spikes, citing ongoing disinflation.
BoJ minutes reveal internal divisions, with some members urging caution due to US tariff fallout.
US initial jobless claims fall to 228K, showing labor market resilience after recent spike.
The Bank of England cut its benchmark interest rate by 25 basis points to 4.25% on Thursday, as expected, marking the fourth cut since August 2024. But the bigger story was the split decision: five members voted for the cut, two favored a deeper 50bps move, and two wanted to hold steady. The division reveals how policymakers are grappling with a complex economic picture—balancing cooling inflation against worsening global trade conditions.
Governor Andrew Bailey struck a cautious tone, emphasizing that recent inflationary pressures, including food and energy volatility, are unlikely to persist. “Disinflation in the UK has continued,” he said, noting that interest rates “are not on auto-pilot.” He acknowledged that tariffs and trade tensions—especially those stemming from recent US policy shifts—continue to weigh on UK activity and sentiment.
Markets interpreted the BoE’s move as dovish, with traders now watching closely to see if the central bank begins a more sustained easing cycle or opts to remain flexible depending on data. The next inflation and wage reports will be critical in determining near-term direction.
BoJ split on response to global trade volatility
Across the globe, the Bank of Japan’s March meeting minutes revealed a sharply divided board on how to proceed with policy amid growing external threats. One member called for heightened caution, citing “rapidly rising downside risks” from US trade policy and its potential spillover into Japan’s export-heavy economy. The member warned that any decision to raise rates must now be carefully timed to avoid derailing domestic recovery.
Others on the board pushed back, arguing that BoJ shouldn’t automatically adopt a defensive stance and might need to “act decisively” if domestic inflationary pressures rise. A third member emphasized incorporating wage growth, inflation expectations, and underlying price dynamics when setting policy, hinting that local factors could still warrant tightening—even amid global headwinds.
BoJ Governor Kazuo Ueda, speaking in parliament today, reinforced that message. While acknowledging that food price volatility—especially in rice—remains elevated, he said these pressures should ease in the months ahead. Still, Ueda stressed the need to closely monitor price trends, given how fluid the global environment remains.
US jobless claims dip
In the US, initial jobless claims fell by 13,000 to 228,000 in the week ending May 3rd, slightly better than expected and reversing part of last week’s spike to a two-month high. Continuing claims also dropped by 29,000 to 1.879 million, offering some relief after climbing to their highest level in over three years in mid-April.
The data suggests the labor market remains resilient, even as broader growth indicators show signs of strain. Markets will look to next week’s CPI and retail sales reports to assess whether the Fed’s cautious hold can be sustained—or if renewed softening in the macro data accelerates rate cut expectations.
