As the Bank of England prepares for its upcoming rate decision, economists predict a cautious approach, maintaining the current rate due to inflationary uncertainties, despite pressures for a reduction.
Economists anticipate that the Bank of England will maintain its interest rate at 5.25% during the upcoming decision on Thursday, as they wait for more definitive signs that inflation is under control. Despite pressures to lower rates due to easing inflation, which stood at 3.2% in March, close to the target of 2%, the Monetary Policy Committee is expected to proceed cautiously.
There is speculation that the Bank’s stance is influenced by actions of other major central banks such as the US Federal Reserve, which has also hesitated in adjusting rates amidst inflation concerns. The decision may further be influenced by the European Central Bank’s potential rate cut in June and forthcoming inflation data for April and May.
Experts like Laith Khalaf from AJ Bell suggest that any reduction in rates by the Bank of England is unlikely until there is greater certainty about the inflationary outlook. Additionally, concerns about pay growth and inflation in the services sector are contributing to the decision to hold rates.
This conservative approach has sparked criticism, with some economists attributing prolonged high interest rates as a factor exacerbating the current recession and economic challenges in the UK. Critics argue for a timelier adjustment in monetary policy to address these economic issues and support recovery. The Bank’s next steps are keenly awaited, with indications of a possible rate cut later in the year if inflation trends towards the 2% target.
