Anticipated Pause in Interest Rate Decreases by Bank of England's Monetary Policy Committee
The Bank of England's Monetary Policy Committee (MPC) will make a decision on UK interest rates tomorrow, September 18, at midday. The MPC, consisting of nine members, including the governor of the Bank of England, Andrew Bailey, three deputy governors, and four external members appointed by the chancellor of the exchequer, will convene to discuss the current economic climate and whether to adjust the base rate.
Most experts predict a 7-2 split in favour of keeping rates on hold at this week's meeting. This prediction is largely due to the persistent inflation, which is expected to prompt the MPC to err on the side of caution, despite signs of weakness in the UK economy.
Inflation, as measured by the Consumer Prices Index (CPI), currently stands at 3.8%, announced today. This figure is close to double the Bank of England's 2% target, reducing the chances of a UK interest rate cut tomorrow.
The UK economy is experiencing weak GDP growth for July, and the number of payrolled employees in the UK fell by 8,000 in August. These economic indicators may contribute to the MPC's decision to maintain the current base rate of 4%.
However, some experts, such as Kevin Brown, savings expert at Scottish Friendly, suggest that softer wage data strengthens the case for another round of rate cuts. Brown predicts that interest rates will be on hold until at least spring next year due to sticky inflation complicating the picture.
On the other hand, James Smith, UK developed markets economist at ING, predicts a rate cut at the next meeting on 6 November. Smith believes that services inflation may undershoot the Bank's forecasts for September, which could tip the balance slightly more in favour of a November rate cut.
Experts overwhelmingly expect the MPC to keep the UK base rate unchanged at 4% tomorrow. However, the final decision will depend on the MPC's assessment of the UK's economic health and the ongoing battle against inflation.
The MPC will announce its decision tomorrow, and the impact on the UK economy will be closely watched in the days following the announcement. There will be two further MPC meetings in the remainder of this year, on 6 November and 18 December.
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