Economist: Bank of England remains cautious amid potential inflation shock

Katharine Neiss, chief European economist at PGIM Fixed Income, said the Bank of England needed to be more convinced that inflation was on a downward trend before it could cut interest rates more quickly. Thursday's 25 basis point cut came as no surprise to anyone, but Governor Bailey was cautious amid geopolitical headwinds, particularly from the US. The UK now faces more potential inflationary shocks, Neiss said, "starting with the UK budget, which is more expansionary and inflationary than expected. Second, the prospect of tariffs and a stronger dollar from the US election will reverberate to the UK."