Base rate cut in August 'on a knife edge' as inflation holds at 2%

Investors scaled back bets on an August Bank of England base rate cut after fresh data showed signs of persistent inflation pressures in some areas of the economy. And while the headline inflation measure remained at target, a core inflation reading of 3.5 per cent and a services inflation rate of 5.4 per cent demonstrated the danger of resurgent price pressures. Prior to the data's publication markets had been pricing a roughly 50-50 chance the BoE's Monetary Policy Committee would vote for an August base rate cut, lowering it from its current level of 5.25 per cent by 25 basis points to 5 per cent. Deputy chief economist at Abrdn, Luke Bartholomew, who thinks the BoE will still opt for a base rate cut next month said: 'The ongoing stickiness of services inflation will leave the Bank wondering how long inflation will stay at the 2 per cent target once favourable base effects have passed and domestic price pressures start to drive headline inflation again.