Best crypto insights delivered straight to your inbox.
- The Bank of England just cut interest rates to 5% for the first time in over four years.
- Governor Andrew Bailey says the direction for interest rates is clear but won’t predict the pace of future cuts.
- Federal Reserve Chair Jerome Powell hints at possible rate cuts in September but stresses that decisions are apolitical.
The Bank of England (BoE) just slashed its interest rates for the first time in over four years, cutting the key rate to 5%. This decision, made by a narrow 5-4 vote, ends the 16-year high of 5.25% that’s been in place since August 2023.
The whole lead-up to this decision was filled with uncertainty, because the BoE didn’t give any clear hints about what they were planning, which kept everyone on their toes.
Markets had already predicted a 61% chance of a 25-basis-point cut at the August meeting. This guesswork played a huge role in how things unfolded.
Market reactions and gilt yields
Once the news was out, UK gilt yields started to show the market’s response. The yield on the 10-year gilt dropped over 9 basis points to 3.880%. The 2-year gilt yield fell more than 10 basis points to 3.702%.
These give us a peek into how investors are digesting the BoE’s decision and what they think might happen next. Governor Andrew Bailey has said that:
“I think the direction of travel is pretty clear.”
Andrew added that they plan to move cautiously, but he didn’t want to guess about how fast or slow future rate cuts would be.
He explained that the central bank’s forecasts are based on the market curve, which includes rates implied by forward markets that lock in future prices. Andrew said these forecasts are in a “reasonable position” right now.
Federal Reserve’s position
Meanwhile, over in the U.S., the Federal Reserve is dealing with its own issues. Last time he spoke to us, Jerome Powell hinted that if inflation meets their targets, they might cut interest rates by 25 basis points as soon as September.
He was firm that this decision wouldn’t be influenced by the upcoming presidential election. Powell stressed that the Federal Reserve stays neutral and apolitical. In his own words:
“We never use our tools to support or oppose a political party, a politician, or any political outcome. We would never try to make policy decisions based on the outcome of an election that hasn’t happened yet.”
Powell also seemed to dismiss the idea of a 50 basis-point rate cut.
“I don’t want to be really specific about what we’re going to do, but that’s not something we’re thinking about right now.”
Don’t just read crypto news. Understand it. Subscribe to our newsletter. It's free.
Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.
Jai Hamid
Jai Hamid has been covering crypto, stock markets, technology, the global economy, and the geopolitical events that affect markets for the past 6 years. She has worked with blockchain-focused publications including AMB Crypto, Coin Edition, and CryptoTale on market analyses, major companies, regulation, and macroeconomic trends. She has attended London School of Journalism and thrice shared crypto market insights on one of Africa’s top TV networks.
CRASH COURSE
- Which cryptocurrencies can make you money
- How to boost your security with a wallet (and which ones are actually worth using)
- Little-known investment strategies that the pros use
- How to get started investing in crypto (which exchanges to use, the best crypto to buy etc)