BoE and Fed Meetings Loom—Are Rate Cuts on the Horizon?

Introduction

The coming week is shaping up to be a pivotal one for global financial markets. With major economic data releases and critical central bank decisions lined up, all eyes are on the Bank of England (BoE) and the Federal Reserve (Fed). Rate cut speculation is heating up, but with inflation, labor markets, and geopolitical tensions all in flux, will policymakers blink?

Inflation Takes Center Stage

April’s UK inflation figures took everyone by surprise. Headline CPI spiked to 3.5%, far above expectations. Later, it emerged that a misreported car tax component added 0.1% to the number—a seemingly small detail that cast a huge shadow over the data’s integrity.

Let’s be real: trust in the Office for National Statistics (ONS) has taken a hit. This isn’t a one-off blunder; recent months have seen errors in unemployment, trade, and producer price data too. The stakes are now even higher for May’s CPI release on June 18.

Market watchers are cautiously optimistic that April may have marked the inflation peak. Energy inflation continues to ease—albeit slowly—but services inflation remains worryingly high at 5.4%, the highest in eight months. That’s the number to watch.

The Federal Reserve Holds Steady—for Now

Stateside, the Federal Reserve is expected to hold interest rates steady this week. Why? Because despite cooling inflation, it’s still above the 2% target. And the economy? Still humming along.

Weekly jobless claims hover around 1.9 million—hardly alarming—and vacancy rates suggest demand for workers remains robust. While President Trump continues to push for rate cuts, the Fed is sticking to its guns. Political pressure could even make them dig in deeper, just to show independence.

Fed officials, even the typically dovish ones, have made it clear: they want more than just a couple of soft inflation prints. As Chicago Fed President Austan Goolsbee put it, they need “a lot more” consistent data before acting. Don’t expect fireworks—yet.

Bank of England—Between a Rock and a Hard Place

Meanwhile, across the pond, the BoE faces an equally tricky puzzle. April’s inflation pop all but killed hopes of a near-term rate cut. And within the Monetary Policy Committee (MPC), opinions are sharply divided.

At the last meeting, two members wanted a bold 50bps cut, while others, including the previously dovish Catherine Mann, opted to hold. Why? The labor market still looks strong, but is that the full story?

Actually, BoE’s own regional data shows hiring is weakening. And the unemployment rate has jumped to 4.6%, the highest in four years. April’s GDP also contracted by -0.3%. In other words, the BoE is juggling conflicting signals. That usually leads to… doing nothing, at least for now.

What the Markets Expect

So are rate cuts on the way? Most analysts believe it’s not a question of if, but when.

Traders are pricing in possible cuts later this year, especially if inflation cools further and growth weakens. Still, expect markets to be jumpy. Just a slight shift in tone from the Fed or BoE could trigger sharp moves in bonds, equities, and currencies.

Spotlight on Retail Sales

US Retail Sales – Holding Up Amid Tariffs

Despite a wave of new tariffs dubbed “Liberation Day” measures, American consumers are still spending. Sure, April’s retail sales were a modest 0.1% increase, but personal income jumped by 0.8%.

That suggests consumers are more cautious but not panicked. The strong labor market provides a cushion, and spending patterns—though less exuberant—remain positive.

UK Retail Sales – Resilience or Mirage?

The UK’s retail sales have been a bright spot in 2025, with back-to-back monthly gains. Good weather and Easter timing certainly helped, but is it sustainable?

Probably not. Rising taxes and a 4-year high in unemployment could soon catch up with households. May’s retail figures, due June 20, might tell us whether this streak has legs—or if a pullback is brewing.

Corporate Updates with Macro Impact

Ashtead Group FY25

Ashtead’s decision to prioritize its U.S. listing underscores a broader shift among UK firms. With over 80% of revenue coming from the States, the move makes sense—financially.

But for the London market, it’s another loss. Revenue dipped 3% in Q3, and operating profits fell amid rising costs. Still, the company expects 3–5% rental revenue growth moving forward. It’s a cautious optimism, but optimism nonetheless.

AO World FY25

Remember AO World, the pandemic-era darling? After crashing to 35p, the stock is climbing back, thanks in part to Frasers Group, which now owns over 25%.

AO World now projects £1.1bn in revenue for FY25, and adjusted pre-tax profit is on track to hit the top end of its £39–£44m guidance. The musicMagpie acquisition will add £30m in revenue, although potential losses and impairments loom. Still, the comeback narrative is compelling.

Oil, Geopolitics, and the Inflation Equation

Recent tensions between Israel and Iran have pushed oil prices higher. If this trend continues, it could mess with inflation expectations and central banks’ plans.

Higher energy costs feed directly into headline inflation and can fuel broader price increases. Both the Fed and BoE are watching this closely. If oil remains elevated, expect delays in rate cuts.

Services Inflation – The Real Canary

Goods inflation is easing. But services? That’s where the real action is.

Services inflation in the UK jumped to 5.4% in April. That’s a red flag because it’s harder to bring down. If this continues into May and June, the BoE’s hands may stay tied, even if growth stumbles.

Central Bank Divergence?

The Fed and BoE are both data-dependent, but their economies are moving in different directions. The U.S. still shows economic resilience. The UK? Not so much.

This could lead to divergence—where the Fed holds longer while the BoE cuts sooner. Or vice versa, if inflation surprises again.

Data Dependency – Buzzword or Real Strategy?

Both central banks love to say they’re “data-dependent.” But what does that mean anymore?

In reality, it’s about buying time. It gives policymakers flexibility—but also fuels uncertainty. Investors are left parsing every data point, speech, or geopolitical headline for clues.

Conclusion – No Easy Choices

As the BoE and Fed prepare to meet, the stakes couldn’t be higher. With inflation sticky, growth wobbling, and global tensions rising, central banks are navigating a minefield.

Rate cuts may still be coming—but not this week. Instead, brace for cautious tones, mixed signals, and plenty of market noise. Because when it comes to monetary policy in 2025, clarity is in short supply.

FAQs

1. What is the biggest risk to rate cuts?
Persistent inflation, especially in services and energy, remains the top risk. Any renewed spikes could derail easing plans.

2. Why is the UK’s services inflation so crucial?
Because it’s sticky and labor-intensive. It reflects long-term cost pressures, making it harder to bring inflation back to target.

3. How do geopolitical tensions impact central bank policy?
Events like the Israel-Iran conflict can spike oil prices, which feed directly into inflation and complicate rate decisions.

4. What should investors watch for after the BoE and Fed meetings?
Listen to the tone of statements, economic forecasts, and any dissent among policymakers—it often signals future moves.

5. Will rate cuts help consumers?
Eventually, yes. Lower rates reduce borrowing costs, boost spending, and support growth. But timing is everything.