The Bank of England is poised to maintain interest rates at 4.75 per cent following inflation’s rise to its highest level since March. Market analysts anticipate the monetary policy committee will deliver an 8-1 vote favouring policy stability during Thursday’s announcement.
Fresh data from the Office for National Statistics revealed inflation increased to 2.6 per cent in November, up from October’s 2.3 per cent. This consecutive monthly rise pushes inflation further from the central bank’s 2 per cent target, whilst services inflation remained fixed at 5 per cent, exceeding MPC projections.
Economic growth has faced headwinds recently, with GDP contracting 0.1 per cent in October. The situation is complicated by wage growth climbing to 5.2 per cent, diminishing prospects for a December rate reduction. Chancellor Rachel Reeves’s budget decision to raise employers’ national insurance contributions to 15 per cent from 13.8 per cent, implementing a £25 billion tax increase, has added pressure to the economic landscape.
Nomura analysts suggest current economic indicators support a measured approach to policy easing, targeting a neutral range between 3 and 3.5 per cent. Goldman Sachs projects quarterly rate adjustments, citing robust inflation figures and uncertainty surrounding the national insurance increase impact.
The European Central Bank has implemented four rate cuts in 2024, bringing eurozone rates to 3 per cent, with potential further reductions to 1.5 per cent by 2025’s end. However, uncertainty regarding Donald Trump’s impending tariff policies has prompted cautious forecasting for Federal Reserve policy adjustments.
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