Due to the US President’s tariff’s war and the Chancellor Rachel Reeves expected to raise taxes even higher it is likely the Bank of England will hold interest rates at 4.5% on Thursday.
Economists believe the Bank’s Monetary Policy Committee (MPC) will not lower the base rate amid the “fog of uncertainty.”
The Bank’s governor Andrew Bailey has said he wants to see a “gradual and careful approach” to reduce rates.
Sandra Horsfield, an analyst for Investec Economics said that inflation has risen over the past few months and latest figures shows there has been an increase in the Consumer Prices Index (CPI) inflation of 3% in January.
She said, “But the 0.2 percentage points downside surprise in the services inflation rate, the stickiness of which has presented the main concern for the MPC even as overall inflation has fallen, will have been met with some relief.”
Members of the MPC will consider the impact of inflation and any spending cuts that may arise in the Chancellor’s Spring Statement at the end of this month.
She added, “There will also be evidence soon, rather than merely forecasts, of how firms are handling the rises in employer national insurance contributions and the minimum wage.”
“Murky as the picture looks now, some things will become a lot clearer soon.
“The fog of uncertainty is an unavoidable constant in economic forecasting.”
Robert Wood and Elliott Jordan-Doak, economists at Pantheon Macroeconomics, said the Bank’s committee will “have to consider US President Trump’s actions” as this has been “driving an equity market sell-off and skyrocketing uncertainty,” this is causing concern for economic growth globally.
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