THE RACE FOR RATE CUTS

Rate cuts have preoccupied financial markets since the start of this year . As we inch towards June the first central bank is yet to blink . The US Federal Reserve ( Fed ) had , until very recently , been expected to take the lead . A series of stronger US CPI readings in the first quarter , largely revolving around the stickiness of core services inflation , seems to have put paid to those expectations . The April CPI figure wasn ’ t as bad as feared , but ‘ shelter inflation ’, known more universally as housing rental costs , is still persistently high . Now Europe has pushed forward as the more likely first contender , with June cuts being pencilled in . The European Central Bank ( ECB ) has a head start over the Bank of England ( BoE ), if June is indeed to be the month of the first cuts . The ECB meets on 6 June while the BoE ’ s next big meeting is 20 June . In the UK , wage inflation has been the main obstacle to an easing . At its most recent meeting , the BoE ’ s Monetary Policy Committee ( MPC ) said that in the decision on rates they would : “ consider forthcoming data releases and how these inform the assessment that the risks from inflation persistence are receding ”. They also stated that “ the Committee noted that this year ’ s pay settlements , which tended to be concentrated in the early part of the year , would provide an important indication of the extent to which pay growth continued to moderate as expected ”. Ahead of the next meeting , the MPC will get one more inflation and labour market reports . In the case of the latter , the impact of a rise in the National Living Wage , of 9.8 % in April , will have at least partially fed through . In any case , a survey released on 13 May by the Chartered Institute of Personnel and Development , of 2,009 employers contacted between 26 March and 18 April , said employers expected median pay settlements in the private sector , for the coming 12 months , to be unchanged at 4 %, while expectations in the public sector remained at 3 %. Consumer price inflation slowed to 2.3 % in April after a reduction in regulated energy prices , but services inflation was stronger than expected . Services inflation is likely to ease throughout 2024 as wage growth gradually slows .