15 godzin temu
The Bank of England faces a tight decision on Thursday as its Monetary Policy Committee weighs whether to cut interest rates from their current 4% level. Most economists expect rates to remain unchanged, but recent economic data showing cooler-than-expected inflation has prompted banking giants Barclays and Goldman Sachs to predict a reduction to 3.75%.
Inflation stayed at 3.8% in September, defying expectations it would rise to 4%. While nearly double the Bank's 2% target, the stable reading and easing food prices offer some encouraging signs. Edward Allenby, senior UK economist for Oxford Economics, said: «On balance, data published since the September meeting should help to slightly ease some of the MPC's worries about above-target inflation persisting. But it's unlikely to be enough to convince a majority to back a November rate cut.»
Persistent Concerns
Economists remain cautious about underlying inflationary pressures. Matt Swannell, chief economic adviser to the EY Item Club, warned that policymakers will «remain concerned about sticky inflation becoming embedded». He noted: «Inflation is almost double the 2% target, and the labour market loosening that may be required to get inflation back to target could be losing steam.» Swannell also questioned whether recent food price declines reflect sustained trends or temporary discounting.
The upcoming Budget from Chancellor Rachel Reeves on November 26 adds another layer of complexity. Ellie Henderson, an economist for Investec, said: «It is looking ever more likely that Chancellor Reeves will have to increase taxes and/or cut spending to meet her fiscal rules and restore a degree of fiscal headroom. Such a tightening in fiscal policy would act as a weight on demand within the economy, and thereby increase disinflationary pressures, making a rate cut by the end of the year more likely.»
Most experts believe the Bank will seek «more sustained evidence that underlying inflationary pressures are softening before cutting again», according to Allenby. The decision marks a shift from earlier predictions that borrowing costs might not fall until 2026, offering potential relief for millions of mortgage holders facing refinancing at higher rates.
Note: This article was created with Artificial Intelligence (AI).
