The Bank of England (BoE) is expected to keep its interest rate steady at 5.25%, as the UK grapples with stubborn inflation, a cost-of-living crisis, and rising oil prices due to the Israel-Hamas conflict. This decision aligns with similar actions taken by the Federal Reserve in the US and the European Central Bank in the eurozone, both aimed at managing their respective economies amid global financial pressures.
The BoE’s anticipated decision comes after 14 consecutive rate hikes, beginning from a record low of 0.1% at the end of 2021. This series of increases was halted in September, marking a pause in the central bank’s tightening policy. Despite these hikes leading to higher loan repayments and adding further strain on the economy, experts from Hargreaves Lansdown (LON:HRGV) predict another rate pause.
Inflation in the UK has been a significant concern, reaching a 41-year peak of 11.1% following Russia’s invasion of Ukraine, which led to surges in energy prices. Although it has since reduced to 6.7%, it remains the highest among G7 nations and poses a potential recession threat, despite wage growth outpacing inflation and economic growth recorded in Q1 and Q2. Other factors such as major worker strikes and declining retail sales have also contributed to economic uncertainties.
Rabobank analysts suggest that central banks may hope rates have topped, but persistent inflation might enforce additional measures. With the Federal Reserve maintaining US interest rates at a 22-year high for a second meeting, and the European Central Bank freezing eurozone borrowing costs after ten consecutive escalations, it is clear that managing inflation remains a priority for global economic leaders.
