The Bank of England following the meeting on August 3 will raise the key interest rate by 25 basis points to 5.25% per annum, according to The Financial Times, Report informs referring to Interfax.
Most analysts and economists don’t exclude the possibility of a 50 bp rate hike following the second meeting in a row.
In June, seven out of nine members of the Monetary Policy Committee (MPC) of the Bank of England voted for such a decision.
The British central bank has raised rates for 13 consecutive meetings, and now the rate is at its highest level since the financial crisis of 2007-2008.
“It’s difficult to give an exact forecast, but now we expect MPC to raise rates by 25 bp,” analysts at Deutsche Bank wrote. “Then we expect two more rate hikes, by a quarter of a percentage point each, after which the rate level will peak to 5.75 percent. We expect the rate cuts to start in the second quarter of 2024. However, there is a risk that the cuts will start later.”
The main problem for the British Central Bank remains high inflation, which in June slowed down to 7.9% in annual terms from 8.7% in May. Although the June value was the lowest since March 2022, it is four times the target value of the Bank of England and is the highest among the world’s leading economies.
Prices excluding food, alcohol, tobacco and energy (core inflation, CPI Core) rose 6.9% last month after rising 7.1% in May, the highest since 1992.
The British Trades Union Congress has warned that tightening monetary policy could trigger a recession and threaten to lose tens of thousands of jobs. The latest statistics indicate some weakening of the labor market, expressed in a moderate increase in unemployment and a decrease in the number of open vacancies. At the same time, British wages are rising at a record pace, which is fueling inflation in the services sector.