Bank of England set to stay in central bank slow lane and keep rates on hold.
The Bank of England looks set to keep interest rates on hold next week as it moves more slowly to cut borrowing costs than central banks in Europe and the United States.
The BoE remains on alert about price pressures in Britain's jobs market that have subsided more clearly elsewhere.
The new government's tax and spending plans have only added to the uncertain outlook for inflation.
Investors see only a one-in-10 chance of the BoE cutting its Bank Rate from its current level of 4.75% on Dec. 19.
By contrast, the European Central Bank, the U.S. Federal Reserve and the central banks of Canada, Switzerland and Sweden are all expected to lower borrowing costs in the coming days.
The BoE has cut Bank Rate only twice from a 16-year peak, helping to make sterling the only currency from the Group of 10 leading economies that has not fallen against the U.S. dollar in 2024.
Investors expect the stop-start pattern to continue. Governor Andrew Bailey last week welcomed the recent slowdown in price growth but said there was still "a distance to travel" with inflation likely to hover a bit above the BoE's 2% target until 2027.
The British central bank last month raised its inflation forecasts after finance minister Rachel Reeves announced a big increase in government spending in her first budget, temporarily boosting demand in an economy with little spare capacity.
The BoE is worried that tax increases on employers will lead to higher prices too - a survey published by the central bank showed more than half of employers planned to pass on some of the cost.
But more than half of the respondents said they would cut jobs and a separate report from Britain's recruitment body also suggested a sharp downturn in hiring in the wake of the budget.
"With risks remaining in both directions, gradual feels like the right approach for now," HSBC economists Elizabeth Martins and Simon Wells said in a note to clients this week.(Cay)
source: Investing.com
