The Bank of England’s policymakers are expected to keep the base rate at 5.25% for the fourth time in row as they are waiting for further signs in the cost-of-living easing.
The Bank’s Monetary Policy Committee (MPC) could keep borrowing costs to an almost 16-year high.
In December the rate of the Consumer Prices Index (CPI) inflation rose to 4% for the first time since February 2023 from 3.9% in November.
Economists have warned it is looking “very slim” that the Bank of England could lower interest rates to control inflation.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said, “With inflation ticking back up in December, it’s likely to have quelled immediate urges from policymakers around the table for rate cuts any time soon.
“Given the ultra-cautious stance three of the nine members of the MPC have taken towards inflationary risks, having voted for a rate hike at the last meeting, the chances of a reduction in the base rate at this gathering look very slim indeed.”
Andrew Goodwin, chief UK economist for Oxford Economics had a more positive view that the surprise rise of inflation in December 2023 is unlikely to worry the MPC too much.”
Goodwin added that the Bank’s policymakers could look for “more reassurance that price and wage pressures are retreating to a target-consistent pace on a sustained basis before pressing the ‘cut’ button.”
Philip Shaw, an economist for Investec Economics believes that most of the MPC members will most likely vote to hold the base rate on Thursday.
Shaw added, this is due to “more concrete signs that inflation is coming down towards the 2% target and that the economy remained subdued.”
Investec Economics does not think that the Bank’s policymakers will cut interest rates until June and by the end of 2024 the base rate could be lowered to 4.5%.
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