Interest Rates Hold Steady in the UK, But Cuts May Be on the Horizon
The Bank of England has decided to maintain interest rates at their current level, despite expectations of a potential cut. This decision comes as UK inflation reaches an eight-month high, with a rate of 2.6% in November.
A Divided Committee
In a surprise move, three members of the Monetary Policy Committee voted to reduce interest rates, while six members favored keeping them unchanged. This split decision has sparked speculation about the possibility of future rate cuts.
Economic Forecasts Downgraded
The Bank of England has downgraded its economic forecast for the fourth quarter of 2024, predicting no growth instead of the previously expected 0.3% expansion. This downgrade is attributed to weaker-than-expected growth figures in recent months, including a surprise 0.1% contraction in October.
Market Reaction
Sterling initially gained against the US dollar following the announcement but later pared back its gains. The US dollar had rallied on Wednesday after the Federal Reserve cut interest rates by a quarter point, signaling a more hawkish outlook for 2025.
Future Rate Cuts Still Possible
Despite the hold on interest rates, many economists believe that cuts may still be on the horizon. With inflation likely to rise, the timing of future interest rate cuts could become increasingly complex, especially if stagflation fears become a reality.
Expert Insights
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, notes that the split vote decision and dovish tone of the minutes suggest that a February interest rate cut remains a possibility. However, the Bank of England risks backing itself into a corner over the pace of policy loosening.
Stay Informed
This is a developing story, and we will provide updates as more information becomes available. Stay ahead of the curve with the latest news and insights on interest rates, inflation, and economic trends.
Leave a Reply