By Jack Barnett
The Bank of England will keep interest rates unchanged at its next meeting on 11 May, marking the first time the central bank has not hiked borrowing costs since November 2021, a new survey out yesterday predicted.
According to a survey by Bloomberg, more than half of City economists suspect Governor Andrew Bailey and the rest of the monetary policy committee (MPC) – the nine strong group that sets official rates in Britain – will end their aggressive rate hike cycle of 11 straight increases next month.
Inflation has raged for over a year, peaking at 11.1 per cent and is still running at more than 10 per cent, forcing Bailey and co into the sharpest batch of rate increases since the 1980s, taking them to a post financial crisis high of 4.25 per cent.
The full effects of those rate increases have yet to feed through to the UK economy and dent inflation, which unexpectedly jumped to 10.4 per cent in February.
As a result, more than half of economists reckon the Bank will pause heaping more pain on household and businesses’ finances on 11 May for fear of doing more damage than is necessary to get inflation back toward its two per cent target.
Wednesday’s figures are also tipped to be the start of a sustained inflation fall throughout 2023, with Office for Budget Responsibility officials projecting it to stumble to around three per cent by Christmas.
A big unwinding in international energy prices after they surged to record highs following Russia’s invasion of Ukraine is expected to yank inflation lower in Britain and across rich economies.
Wage increases – hovering around historically high levels of seven per cent for many months – are also poised to trim as businesses rein in hiring intentions in response to the UK’s economic slump.
Economists have warned that much stronger than feared data since the turn of the year that illustrates GDP is holding up much better than projected could keep inflation elevated.
That may lure the Bank into twelfth straight rate increase next month, probably to the tune of 25 basis points. The EY ITEM Club said yesterday it reckons Bailey and co will opt for another increase at their next meeting.
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