Bank of England Governor Andrew Bailey has suggested that the central bank could take a more aggressive approach to interest rate cuts if inflation continues to be low. This has caused the pound to drop to a two-week low against the US dollar. Bailey’s comments come at a time of rising geopolitical tensions in the Middle East, which could impact global markets.
The Bank of England has been more cautious about rate cuts compared to other central banks, having only made one quarter-point cut this year. However, the markets now believe there is a 96.5% chance of a rate cut in November, to 4.75%.
Bailey’s remarks have also affected the stock market, with housebuilder shares rallying as traders anticipate increased demand for homes with lower borrowing costs. Additionally, the government bond market has seen prices rise, indicating expectations of deeper interest rate cuts.
Overall, Bailey’s comments have significantly impacted the financial markets, causing the pound to continue to weaken against both the US dollar and the euro. Investors are now more confident that the Bank of England will cut interest rates in the coming months as global economic uncertainties persist.
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