The Bank of England has chosen to keep interest rates at 3.75% as inflationary concerns persist in the UK economy. In its latest quarterly forecast, the monetary policy committee (MPC) predicted weaker growth and lower-than-expected inflation.
Despite this, policymakers left borrowing costs unchanged, signaling that further rate cuts may be on the horizon. The decision was made despite forecasts suggesting a weaker jobs market, with unemployment rates rising to 5.3% by the end of the year. Policymakers expect that Labour's increase in employers' national insurance contributions and rising minimum wage will dampen bumper wage rises, which some had feared would fuel high inflation.
The Bank now expects inflation to fall more than initially predicted, down from a forecast of 2.1% in its last quarterly report. This decline is largely attributed to the government's autumn budget, which included measures such as cuts to utility bills and a rail-fare freeze.
However, some experts remain cautious about the pace of rate cuts. Yael Selfin, chief economist at KPMG, noted that the downward revision in inflation reflects the impact of these policies but warned that consumers' high inflation expectations and strong wage growth pose risks of "policy error" if the MPC cuts rates as expected.
The Bank's governor, Andrew Bailey, expressed optimism about the prospects for further rate reductions. He predicted that inflation would fall back to 2% by the spring and said that all going well, there should be scope for some further reduction in bank rate this year.
Financial markets are currently pointing to a 50/50 likelihood of a rate cut at the MPC's next meeting on March 19th. Bailey endorsed this assessment, saying that the outlook is "not a bad place to be."
In a related development, Andrew Bailey criticized the leak of sensitive details of government policy by disgraced former minister Peter Mandelson during the financial crisis. He expressed shock and disappointment over the revelations and paid tribute to his late colleague Alistair Darling, who worked closely with him on the response to the crisis.
Despite this, policymakers left borrowing costs unchanged, signaling that further rate cuts may be on the horizon. The decision was made despite forecasts suggesting a weaker jobs market, with unemployment rates rising to 5.3% by the end of the year. Policymakers expect that Labour's increase in employers' national insurance contributions and rising minimum wage will dampen bumper wage rises, which some had feared would fuel high inflation.
The Bank now expects inflation to fall more than initially predicted, down from a forecast of 2.1% in its last quarterly report. This decline is largely attributed to the government's autumn budget, which included measures such as cuts to utility bills and a rail-fare freeze.
However, some experts remain cautious about the pace of rate cuts. Yael Selfin, chief economist at KPMG, noted that the downward revision in inflation reflects the impact of these policies but warned that consumers' high inflation expectations and strong wage growth pose risks of "policy error" if the MPC cuts rates as expected.
The Bank's governor, Andrew Bailey, expressed optimism about the prospects for further rate reductions. He predicted that inflation would fall back to 2% by the spring and said that all going well, there should be scope for some further reduction in bank rate this year.
Financial markets are currently pointing to a 50/50 likelihood of a rate cut at the MPC's next meeting on March 19th. Bailey endorsed this assessment, saying that the outlook is "not a bad place to be."
In a related development, Andrew Bailey criticized the leak of sensitive details of government policy by disgraced former minister Peter Mandelson during the financial crisis. He expressed shock and disappointment over the revelations and paid tribute to his late colleague Alistair Darling, who worked closely with him on the response to the crisis.
while inflation is expected to come down, it's defo a sign that policymakers are keeping a close eye on things and not wanting to spark any more economic worries 
. personally i think they're being cautious about making any premature moves that could throw the whole economy off balance 
. yael selfin's warning about "policy error" is super valid - we don't want to risk undoing all the good work of the government's autumn budget 
. but at the same time, a 50/50 chance of a rate cut on march 19th? that's still looking pretty juicy for financial markets 
!
! I mean, come on, 3.75% is already pretty high, how much longer can we keep living like this? 
I'm just so done with this economic rollercoaster. Can we please just have some stability for once?! 
. I just want to see my mortgage payments go down so I can finally afford to take a holiday with my family without breaking the bank! 
. Can someone explain it in simple terms? 
. It's like when you're making a decision at work or something, you can't always please everyone, but you've gotta make choices that'll benefit the team or organization in the long run... 
. But what concerns me is that experts are still warning about policy error if the MPC makes too many cuts. Yael Selfin's warnings make sense imo - consumers are still expecting high prices so we don't want to shock the economy 
. Can't say I agree, but 50/50 odds of another rate cut? Guess we'll see how that plays out... 
. Still, I'd love to see how this all plays out in the next few months – will the Bank follow through on its promise of more rate cuts? 
. All this talk about inflation and wages is making me think that maybe we won't see those massive hikes after all 
. But I still have a gut feeling that something's gonna happen at that March meeting... it's just too much of a gamble for them to play it safe, right?