The Bank of England (BoE) is likely to keep its current interest rates next week. They won’t lower them until they see clear proof that inflation is going down. While other central banks are cutting rates because of COVID, the BoE is being careful.
Governor Andrew Bailey is hopeful about inflation going down, but he says they need to see how long the measures to control it will last. There’s uncertainty about job market data and risks from world events.
Experts think most of the people who decide on rates will still vote the same way, with six wanting to keep rates the same, two wanting to raise them, and one wanting to lower them. This will be the fifth time they’ve kept rates the same. The BoE thinks inflation will go down to 2% in the second quarter but then go back up to nearly 3% later in 2024.
Even though inflation was very high in October 2022, the BoE is worried that wages are going up too quickly.
Analysts anticipate a fifth consecutive hold on interest rates (Via Josh Smith/Getty Images)
They’re concerned because the minimum wage is going up and more employers are giving their workers raises, which could keep prices high.
Charlie Bean, who used to work for the BoE, warned that it might be too early to feel optimistic. Even though things seem to be getting better, people aren’t asking for rates to be lowered faster. The BoE is expected to wait longer than the European Central Bank and the U.S. Federal Reserve before changing rates.
Economists think the BoE might start lowering rates in the third quarter because there are mixed signals about the economy and inflation might go up and down. But if they keep rates the same for too long, it might make it hard to explain their decisions because of all the uncertainty.
The BoE will decide what to do about interest rates on Thursday, but they won’t give any predictions about the economy at the same time.
