The Bank of England (BoE) will be in a much better position to understand the UK’s economic picture by Thursday afternoon. The labor market remained hot, which the central bank is hoping to see cool considerably, as indicators in the May and June employment reports start coming out. This will be critical to shaping its future monetary policy decisions.
Economic analysts are closely watching the employment numbers, and so should you. These figures will shed vital light on the status of our labor market. A strong report might suggest greater economic resilience than previously thought, but bad numbers will likely increase the case for action. The statistical implications are of great concern to the BoE. Given current market sentiment, that would essentially seal the deal for an August rate cut. Swap markets have almost completely priced in a 90% likelihood of this reduction. This is indicative of the growing belief among investors that a monetary policy pivot is coming soon.
Incredibly, the importance of the coming employment data is hard to overstate. It is a hugely important signal of economic performance and it will almost certainly shape the BoE’s direction of travel in the coming months. If the incoming data continues in line with what the markets expect, that will provide support for rate cut arguments. This decision seeks to promote development while addressing inflationary pressures.