The Bank of England is widely predicted to maintain its current interest rate amid the uncertainty surrounding the commercial rates of the president of the United States, Donald Trump, and the imminent increases in taxes of the United Kingdom.
Experts anticipate that the Monetary Policy Committee (MPC) will maintain rates at 4.5 percent on Thursday, continuing the gradual decrease in loan costs initiated in August 2024.
This policy has provided some relief to borrowers through lower mortgage rates.
However, the governor of the Bank of England, Andrew Bailey, has emphasized a cautious approach to obtain new rate reductions, citing the need to closely monitor national and global economic changes.
A key concern is the recent resurgence of the United Kingdom inflation, mainly driven by the increase in energy prices, water invoices and bus rates.
Sandra Hornsfield, Analyst of Investte Economics, described recent economic data as “bittersweet.”
While it is positive in some aspects, the increase in the inflation rate of the consumer price index (CPI) to 3 percent in January presents a challenge for those responsible for formulating policies, he said.
“But the downward surprise of 0.2 percentage points in the inflation rate of the services, whose sticks has presented the main concern for the MPC, even when the general inflation has fallen, it will have been received with some relief,” he said.
Policy formulators will also consider the impact of inflation of possible expenses of expenses in the government's spring declaration, which will be announced at the end of this month, as well as new US tariffs on the steel and aluminum of the United Kingdom.
“There will also be evidence soon, instead of simply forecasts, how companies handle the increases in the contributions of the National Employer Insurance and the minimum wage,” Horsfield added.
“Turbio as the image is seen now, some things will become much clearer soon,” he said, adding: “The fog of uncertainty is an inevitable constant in the economic prognosis.”
Andrew Goodwin, chief economist of the United Kingdom in Oxford Economics, said that the “most obvious threat” for the path of interest rate cuts “will be evidence of the impact of April increases on regulated prices, contributions from the National Employers Insurance and National Salary.”
The bank has previously said that additional costs for companies could risk leaving more people without work or increasing inflation if retail increases for customers.
Goodwin also expects MPC to maintain interest rates at 4.5 percent on Thursday in greater uncertainty.
Robert Wood and Elliott Jordan-Doak, economists from Pantheon Macroeconomics, said the MPC “will have to consider the actions of the president of the United States” that have been “promoting a market of shares that are sold and triggered uncertainty” and, therefore, will feed the concerns about the perspective of global economic growth.
But they added that the MPC is “as unable as any other person to predict Trump's next movement.”
The committee last month insisted that it is not yet known how rates, which have been placed in China, Canada and Mexico, will affect the economy of the United Kingdom.
Pantheon economists predict that interest rates will be kept waiting this month, but that two more cuts will come in May and November of this year.
