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The Bank of England is expected to reduce interest rates by a quarter of this week, as policy makers weaken the British economy weakening, as well as the possibility of short -term capture in inflation.
Financial markets are betting that the Monetary Policy Committee at the Bank of England will reduce its official price to 4.5 percent in the third reduction to the cost of borrowing in a little more than half a year.
But this week's MPC deliberations are scheduled for the possibility of a return to inflation in the United Kingdom, along with a global trade war after US President Donald Trump imposed a tariff on Canada, Mexico and China.
The Bank of England is also struggling with the decline in business confidence in the UK and investigative studies indicate the repetition of companies. The data indicates that the UK economy may have failed to grow in the last months of 2024.
“We believe that the weakness in the recent growth data, the deterioration in the labor market indicators and the gradual progress with the inflation of basic services will mean that there is widespread support to reduce (a quarter of a point),” said Gary Stein, chief economist in Goldman. Sachs.
The markets are pricing about three price cuts in the total of this year, as the Bank of England moves on fixed wage pressure, along with evidence of the stagnant economy. Many economists expect a 8-1 vote in MPC in favor of a declining step, with Catherine Man likely considering.
Consumer prices have grown by 2.5 percent in December, slower than what analysts expected, near the official goal 2 percent and much less than the two -level levels registered in 2022.
The inflation of services, which the Bank of England closely slowed as a scale of basic price pressures, slowly slowed to 4.4 percent in December from 5 percent of.
However, high energy prices may increase inflation in the coming months. England bank analysts said that the Bank of England can expect the annual consumer price index to grow by 3 percent or higher in the second quarter of 2025, which is much higher than November about 2.6 percent higher.
Chancellor Rachel Reeves has increased to raise national insurance contributions to the employer, as well as a sharp increase in the minimum national wages of employment costs, which put the Bank of England to be ready to increase the prices that were transferred to consumers.
This came alongside evidence of the weak economy, which is likely to prove growth and inflation in the long run. In December, the Bank of England said it expected growth in the last quarter of 2024, i.e. weakening 0.3 percent expansion in the prediction round in November.
Some economists expect that the innovation bank must re -predict it by 1.5 percent of GDP this year.
Rob Wood in Pantheon said MPC would need to deal with a possible “stagnation shock”. “All investigative studies now show slowing growth and high inflation pressure, but they differ on the severity of movements.”
Among those who watch the decision of the Bank of England and the reaction of the bond market will closely be Reeves, who is waiting for a major group of expectations from the budget responsibility office in March.
The sales process in the schools of sect in early January raised fears that the head hall against the main dick base of Reeves-that the current spending must be funded by tax receipts by 2029-30–will be disposed of through the payment of higher governmental interest.
Last week, the European Central Bank reduced its standard price by a quarter of a point to 2.75 percent, while Canada Bank reduced its main average by half a point to 3.25 percent. On the contrary, the US Federal Reserve has unchanged rates at 4.25 to 4.50 percent of predictors including the International Monetary Fund from the United States of the superiority of other G7 economies this year.
