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Bank of England expected to hold interest rates

Governor of the Bank of England, Andrew Bailey. (Photo by Henry Nicholls – WPA Pool/Getty Images)

The Bank of England is expected to keep interest rates on hold for the third time in a row, as new data has pointed to potential cracks in the economy.

Today, the Monetary Policy Committee (MPC) will meet for the last time this year to vote on interest rates – which help set mortgage rates set by banks.

This will happen at midday – follow the live feed above Bright city

The central bank raised interest rates in 14 consecutive meetings until reaching a 15-year high of 5.25%.

Bank interest rate-setting agencies have increased borrowing costs to put pressure on consumer spending to reduce inflation.

However, the MPC left interest rates unchanged in its September and November meetings after seeing the inflation rate cool significantly.

The latest meeting comes after key economic data from the Office for National Statistics (ONS) this week also showed signs of a cooling in the economy.

On Wednesday, the ONS said Britain’s gross domestic product (GDP) fell 0.3% in October as the manufacturing and construction sectors were hit by bad weather.

It comes a day after the statistics agency revealed that wage growth had slowed to its fastest pace in two years.

The ONS said private sector regular earnings, excluding bonuses, rose 7.3% in the three months to October, down from 7.8% in the previous three months, showing the market Labor is weakening.

As a result, economists have increased expectations for an interest rate cut next year.

Previously, financial markets had priced a rate cut of 0.75 percentage points in 2024, but on Wednesday they predicted a 1 percentage point cut would take rates to 4.25% in end of 2024.

However, experts still expect interest rates to remain stable in Thursday’s vote and in the first months of the new year.

Martin Beck, chief economic adviser at EY Item Club, said little had changed since the previous interest rate decisions – held in September and November – to deliver a different outcome.

“The MPC meeting in December will almost certainly prove the third consecutive meeting with no changes to interest rates,” he said.

“There have been no economic surprises over the past four weeks and inflation and wage growth have slowed (previously more than the Bank of England expected).”

The Bank of England remains cautious about cutting interest rates despite signs of cooling inflation Economic activity was subdued in recent data.

The Bank’s Governor, Andrew Bailey, and other members of the MPC, have indicated that interest rates will stay the same for some time.

At Parliament’s Finance Committee last month, Mr Bailey said the threat of inflation in the UK was being underestimated and said the Bank remained focused on persistent inflation concerns.

He pointed out that inflation in the services sector, where most Britons spend their money, is likely to remain at around 6% until early 2024.

James Smith, developed markets economist at ING, said he expected the Bank to reiterate this message.

“The market is pricing in three rate cuts by 2024 and we doubt the Bank will be too happy about that,” he said.

“Expect policymakers to reiterate that interest rates need to remain restrained for a while.

“We only received the statement and minutes on Thursday, there was no press conference or forecast, so the opportunity to change the message is quite limited.”

The Bank of England also warned that almost a million people could see their mortgage repayments increase by more than £500 a month by the end of 2026 as pressure from higher interest rates continues to hit the economy.

Press Association – Henry Saker-Clark


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