My colleague Daniel O’Boyle, who understands far more about the betting markets than I do (through a professional rather than personal interest I should add), tells me that the City market-implied odds of the Bank of England cutting in interest rates by August are roughly the same as those from the bookies for Manchester City winning the Premier League.
Meanwhile the chances of rates staying on hold through to September are on a par with those of Arsenal landing the title.
Given that Pep Guardiola’s men are only a stumble away from handing the honours to the Gunners, that feels like an unexpectedly high possibility of no summer moves from the Bank of England.
I would rate the chances of a June cut higher than the 40% likelihood currently priced in, but still by no means a slam dunk. By the time the MPC make their decision on 20 June it will have before it two more sets of inflation data, including the crucial April figures.
That was the month when the energy cap fell 12% and the Consumer Prices Index is widely thought to have dropped back below the 2% target for the first time since July 2021. We’ll soon find out if it did.
There will be statistical meat for the hawks to gnaw on as well, notably the inflationary impact of a near 10% rise in the minimum wage.
Perhaps more significant still is the fairly startling fall in the oil price over the past month with Brent Crude down from $90 a barrel at the start of April to below $82 as hopes of a ceasefire in Gaza build.
If, and it is a huge if, that can be sustained, the MPC might really start to hope that inflation has been tamed and it is time to get the wheels of the economy turning again with a rate cut. It is still very much in the balance and another flare up in the Middle East could easily scupper things.
But if I were a gambling man, I might put money on tomorrow’s MPC decision being the last “no change” for a while.
