houseofthedeadscarletdawn| The Bank of England moves towards a rare cycle of slow interest rate cuts

After the central bank starts to cut interest rates, it tends to move quickly. But when the Bank of England's monetary policy committee thinks the time is ripe to lower borrowing costs, it may choose a more cautious path.

What is different about this cycle is that it will take place during an economic recovery, not a downturn. The British economy rebounded from a mild recession, growing at its fastest quarterly pace since the end of the COVID-19 epidemic, official data showed on Friday.

This is in stark contrast to the previous three interest rate cut cycles-1998, 2001 and 2008-when the bank moved swiftly to support growth.

This week, Bank of England Governor Pele admitted that the MPC was entering almost unknown territory. "most interest rate reduction cycles are actually triggered by shocks of one kind or another, not'HouseofthedeadscarletdawnWe have reached the top and now we want to weaken the restrictions of monetary policy, which I might call the natural cycle, "Mr Bailey said. Earlier, the bank decided to keep its key interest rate at a 16-year high of 5.Houseofthedeadscarletdawn.25%.

Asked if there were many precedents for the actions the bank was about to take, he replied: "I'd like to remind you, not much." He added that what was about to happen was "quite interesting-we were watching it, too".

Pele, governor of the Bank of England

Investors are betting that the Bank of England will cut interest rates by 25 basis points for the first time in August and then cut them again around November. Bailey himself did not rule out the possibility of action in June, saying that a rate cut at the next meeting was "not impossible, but not a foregone conclusion."

British economists expect the Bank of England to take a series of quick actions once it starts cutting interest rates. The median forecast of 44 people surveyed by Bloomberg is that it will cut interest rates four times at five meetings from June to December, each by 25 basis points. Bailey is more cautious. "We have no preconceptions about the speed and intensity of interest rate cuts," he said.

A sharp cut in interest rates would be good for Prime Minister Sunak, who wants something to feel good about the economy ahead of the widely expected autumn election. His Conservative Party currently lags behind the opposition Labour Party in the opinion polls.

But the Bank of England's policymakers will not try to stimulate economic growth, but will reduce the "restrictive" borrowing costs set to curb inflation. The plan is to carefully cut interest rates to neutral levels. But no one knows exactly what level it is, so officials will have to cross the river by feeling the stones. "this is something that people are slowly going to figure out," Ben Broadbent, the outgoing vice president, said on Thursday.