Bank of England holds interest rates steady, and other economics stories to read this week

1. Bank of England holds rates steady

The Bank of England (BoE) has held its main interest rate at 5.25% – a 16-year high. The decision came at its last meeting before the UK’s general election on 4 July.
The Bank’s governor, Andrew Baily, pointed to positive news that inflation had returned to its 2% target, but said it was too soon to cut rates.
“We need to be sure that inflation will stay low and that’s why we’ve decided to hold rates at 5.25% for now,” he said.
As previous energy price-falls drop out of annual inflation data, the BoE expected inflation to return to above target, and repeated a May forecast for inflation to be around 2.5% in the second half of this year.
On the same day, the Swiss Central Bank cut interest rates for a second time this year.

2. US Budget deficit expected to rise

The Congressional Budget Office (CBO) has said that the US budget deficit will reach $1.915 trillion in the 2024 fiscal period, exceeding 2023’s $1.695 trillion and the largest outside of the COVID-19 pandemic.

The increase is mostly down to student loan relief, Medicaid healthcare, higher Federal Deposit Insurance Corp costs related to bank failures, and aid to Ukraine and Israel, Reuters reports. Deficits had previously fallen significantly in 2022 as a result of reduced COVID-19 spending.
The CBO predicts the deficit will climb further in the next fiscal year, to $1.938 trillion.

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