The Zhitong Finance App learned that Michael Saunders (Michael Saunders), a former interest rate setter at the Bank of England, believes that the possibility of interest rate cuts in June has disappeared, but the market may have underestimated the potential chance of cutting interest rates later this year. As a senior adviser at the Oxford Institute of Economics, Sanders pointed out after analyzing higher-than-expected inflation data released on Wednesday that this has drastically reduced the possibility that central bank officials will take action next month. Coupled with the government's decision to hold elections, this probability was further weakened.

Sanders made it clear in an interview on Thursday: “The Bank of England itself does not want to be an inducer of market fluctuations. Especially during the election campaign, it is highly unlikely that the Monetary Policy Committee will suddenly adjust interest rates. However, in reality, the inflation data has basically ruled out the possibility of interest rate cuts in June.”

If interest rates were cut in June, this would be the Bank of England's first policy change in 10 months. This unexpected move should have shocked the market. However, yesterday, the market drastically lowered expectations for interest rate cuts next month. Sanders predicts that the first rate cut is more likely to occur in August after the election of a new government on July 4.

Although there is another set of price data to be released before the June meeting, Sanders expressed doubts about this, believing that these data are unlikely to change the current situation. “Unless the data is excellent, it is unlikely that expectations of early interest rate cuts will be rekindled,” he stressed.

Sanders further stated, “I do think the market may currently slightly underestimate the extent to which interest rates will be cut during the year. I still maintain my previous view. Interest rates are expected to be cut three times, the first time in August, and then a few more times before the end of the year.”

In addition to Sanders, investment banks Goldman Sachs and Morgan Stanley also expect the Bank of England to start cutting interest rates in August.

Among them, Goldman Sachs said that the UK inflation data for April cooled less than expected, making it unlikely that interest rates would be cut in June. The bank's economists now believe that the Bank of England will start cutting interest rates in August, thus giving the central bank more time to see progress in curbing prices.

Furthermore, Morgan Stanley updated its expectations for the Bank of England's monetary policy. It is expected that the Bank of England will start cutting interest rates in August, which was previously expected in June. This adjustment is also based on recent inflation data that exceeded expectations.

The investment bank pointed out that although the overall inflation rate in the UK has fallen to its lowest level since July 2021, and the core inflation rate has finally fallen back to around 3%, the key April inflation data is still higher than expected, which has a significant impact on the Bank of England's short-term policy decisions.

Looking ahead, Morgan Stanley did not make major adjustments to its structural outlook due to an inflation report. The company maintained its forecast for the Bank of England to cut interest rates by a total of 75 basis points this year. Interest rate cuts are expected to occur in September and November, respectively.