City investors are increasing their bets on the Bank of England potentially cutting interest rates in September. The likelihood of a rate cut next month has risen to 45%, with traders also expecting a second rate cut by the end of the year. However, some economists, such as James Smith from ING, believe that the Bank of England may wait until November or December to implement further rate cuts.
The recent data showing that inflation rose less than expected in July, to 2.2%, has fueled speculation about a rate cut. Despite the uptick in inflation, the Bank may still consider cutting rates given the slowdown in services inflation. However, some analysts, such as Aaron Hussein from J.P. Morgan Asset Management, believe that the Bank may hold off on a rate cut in September due to concerns about fanning inflation flames.
In addition to the interest rate speculation, UK house prices increased by 2.7% in June, while rents rose at a faster rate of 8.6%. This could have implications for future rail fare prices, as the government is planning to announce fare rises later this year. The inflation data also reflects trends in other major European economies, with inflation in France and Germany both at 2.6% in July.
Overall, while investors are betting on a potential rate cut in September, economists and analysts remain divided on the timing and necessity of further monetary policy changes by the Bank of England.
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