Market Data 
By William Schomberg
LONDON (Reuters) – The Bank of England is likely to take another step towards its first interest rate cut in four years on Thursday as inflation falls, but will probably be cautious about signalling that a move is imminent.
The central bank is widely expected to keep its benchmark Bank Rate on hold for a sixth meeting in a row at 5.25% – the highest since 2008 – after its May monetary policy discussions.
The big question for investors is whether the BoE suggests that a cut could come in June – when the European Central Bank has already signalled it will reduce borrowing costs – or, like the U.S. Federal Reserve, holds out for longer.
“We view further caution as reasonable,” said Paula Bejarano Carbo, a National Institute of Economic and Social Research economist, citing still-strong pay increases in Britain’s tight jobs market and uncertainty over conflict in the Middle East.
Financial markets are fully pricing a first quarter-point BoE rate cut only in August and another in November or December taking Bank Rate to 4.75%, followed by more cuts in 2025.
But investors have bet increasingly in recent days on the possibility of an earlier move. Rate futures markets on Wednesday put a nearly 50-50 chance on a cut in June.
Matthew Swannell, UK economist at BNP Paribas (OTC:), said the BoE had discovered over the past couple of years that changes in rates were slower to impact inflation than in the past, and that it probably wanted to move relatively quickly to cut them now as headline inflation is likely to dip below its 2% target soon.
But the BoE would probably be reluctant to send an explicit signal about the timing of a first cut on Thursday, he said.
“We don’t expect to open the minutes and see them giving ECB-style guidance,” Swannell said.
He predicts Bank Rate will be lowered three times to 4.5% by the end of 2024, starting in June.
An early move would be welcome for Prime Minister Rishi Sunak, who has told voters that the economy is turning a corner but is struggling to rein in the big opinion poll lead for the opposition Labour Party with an election expected this year.
MESSAGES FOR MARKETS
If the BoE does signal an acceleration towards a rate cut, it could come in the vote tally on Thursday.
Members of the BoE’s Monetary Policy Committee will probably vote 8-1 for a second time in a row to keep Bank Rate on hold, according to most economists polled by Reuters.
But some said Deputy Governor Dave Ramsden might join Swati Dhingra who has so far cast the solitary vote for a cut.
Ramsden said last month inflation might prove weaker than the BoE’s forecasts although Chief Economist Huw Pill warned that rate cuts remained some way off.
Wage growth and services price inflation of around 6% remain higher than in the United States or euro zone, even though British economic growth is more sluggish.
There might also be a message in the BoE’s new inflation projection: if it lowers the two- and three-year forecasts significantly it would be interpreted by investors as a signal that they are pricing in too few interest rate cuts.
The BoE’s inflation forecasts are based on market pricing in the run-up to its MPC meetings.
Bailey and other officials will hold a press conference at 1130 GMT, half an hour after the rate decision is announced along with minutes of May’s meeting and its latest forecasts.
