{"id":10871,"date":"2024-12-14T12:15:38","date_gmt":"2024-12-14T12:15:38","guid":{"rendered":"https:\/\/en.econostrum.info\/?p=10871"},"modified":"2024-12-14T12:15:38","modified_gmt":"2024-12-14T12:15:38","slug":"bank-of-englands-interest-rate-delay-cuts-2025","status":"publish","type":"post","link":"https:\/\/en.econostrum.info\/bank-of-englands-interest-rate-delay-cuts-2025\/","title":{"rendered":"Bank of England&#8217;s Critical Interest Rate Decision : Will Inflation Delay Cuts in 2025?"},"content":{"rendered":"<p><strong>With the UK\u2019s<\/strong> <strong>economic landscape<\/strong> showing mixed signals, all eyes are on the <strong>Bank of England\u2019s upcoming decision<\/strong> on <strong>interest rates<\/strong>. While <strong>inflation<\/strong> and <strong>economic growth<\/strong> continue to influence policymaking, key factors suggest that a <strong>rate cut<\/strong> may not be imminent. As the <strong>central bank<\/strong> faces mounting pressures from both <strong>domestic<\/strong> and <strong>global factors<\/strong>, its stance on <strong>monetary policy<\/strong> in the coming months will be crucial in shaping the country&#8217;s <strong>financial outlook<\/strong>. What direction will the <strong>BoE<\/strong> take next?<\/p>\n<h2>Inflation Rise Weakens Prospects for Interest Rate Cuts<\/h2>\n<p>The BoE\u2019s decision to hold rates is largely driven by recent <strong>inflation<\/strong> data. In <strong>October<\/strong>, <strong>inflation<\/strong> rose to <strong>2.3%<\/strong>, marking the largest increase in <strong>two years<\/strong>. This surge, attributed to higher <strong>energy costs<\/strong>, has reignited concerns about <strong>inflation<\/strong> persistence, particularly as the rate increase was steeper than anticipated.<\/p>\n<ul>\n<li><strong>Energy price hikes<\/strong>: Contributed significantly to the inflation uptick.<\/li>\n<li><strong>Services sector inflation<\/strong>: Also remains elevated, exacerbating concerns for policymakers.<\/li>\n<\/ul>\n<p><a href=\"https:\/\/en.econostrum.info\/uk-inflation-surges-to-2-3-in-october\/\" target=\"_blank\" rel=\"noopener\">The inflation rise<\/a> has dampened any remaining hopes for a <strong>rate cut<\/strong> before the end of the year, as the BoE&#8217;s primary focus is on controlling <strong>inflation<\/strong>.<\/p>\n<h2>The Effect of National Insurance Hikes on Inflationary Pressures<\/h2>\n<p>In addition to <strong>inflation<\/strong>, the recent <strong>Labour Budget<\/strong> has introduced new tax increases for businesses, particularly higher <strong>national insurance contributions (NICs)<\/strong>. These hikes are expected to exert additional pressure on <strong>inflation<\/strong>, as companies may pass on the increased costs to consumers.<\/p>\n<ul>\n<li><strong>NICs increase<\/strong>: Described by <strong>Andrew Bailey<\/strong>, Governor of the BoE, as the \u201cbiggest issue\u201d following the <strong>Budget<\/strong>.<\/li>\n<li><strong>Impact on inflation<\/strong>: Experts suggest that the <strong>tax hike<\/strong> could keep <strong>inflationary pressures<\/strong> elevated for longer.<\/li>\n<\/ul>\n<p>Bailey has emphasized that the effects of the <strong>NICs increase<\/strong> on the broader economy remain uncertain. However, he has consistently advocated for a cautious approach to reducing <strong>interest rates<\/strong>, indicating that further cuts might not be advisable until the full economic impact of these changes is clearer.<\/p>\n<h2><strong>UK Economic Growth and the Impact of GDP Decline<\/strong><\/h2>\n<p><strong>Economic growth<\/strong>, as measured by <strong>Gross Domestic Product (GDP)<\/strong>, showed signs of weakness in <strong>October<\/strong>. The UK\u2019s <strong>GDP<\/strong> contracted slightly, raising concerns among some analysts that the <strong>BoE<\/strong> might lean toward reducing rates to stimulate growth. However, economists attribute this contraction to a temporary <strong>wait-and-see approach<\/strong> taken by businesses and consumers ahead of the <strong>Budget&#8217;s<\/strong> policy changes.<\/p>\n<ul>\n<li><strong>October GDP<\/strong>: Showed a modest contraction, but economists believe this is a temporary response.<\/li>\n<li><strong>Expected rebound<\/strong>: Growth is forecasted to pick up in the months following the policy adjustments.<\/li>\n<\/ul>\n<p>While higher <strong>interest rates<\/strong> can dampen <strong>economic growth<\/strong>, the contraction in <strong>GDP<\/strong> is seen as largely a result of economic actors waiting for clearer signals from government policy, and not a permanent downturn.<\/p>\n<h2>The Bank of England\u2019s Steady Approach to Interest Rates<\/h2>\n<p>With <strong>inflation<\/strong> concerns lingering and <strong>economic growth<\/strong> still fragile, the <strong>BoE\u2019s Monetary Policy Committee (MPC)<\/strong> is unlikely to make any immediate changes to its <strong>interest rate<\/strong> policy. <strong>Thomas Pugh<\/strong>, <a href=\"https:\/\/www.rsmuk.com\/our-people\/thomas-pugh\" target=\"_blank\" rel=\"noopener\">an economist at <strong>RSM<\/strong><\/a>, predicts that the <strong>BoE<\/strong> will maintain its gradual approach to monetary policy. He noted, \u201cUltimately, that means mortgage holders won\u2019t be getting an early Christmas present from the BoE this year.\u201d<\/p>\n<p>The <strong>Bank of England\u2019s monetary policy<\/strong> remains focused on managing <strong>inflationary pressures<\/strong> while navigating the challenges posed by recent <strong>economic data<\/strong>. Although some economists predict <strong>rate cuts<\/strong> in <strong>2025<\/strong>, the immediate outlook suggests that <strong>interest rates<\/strong> will remain steady for the foreseeable future. The <strong>BoE\u2019s cautious stance<\/strong> reflects ongoing uncertainties regarding <strong>inflation<\/strong> and <strong>economic growth<\/strong>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>With <strong>inflation<\/strong> unexpectedly climbing and <strong>economic indicators<\/strong> showing mixed signals, the <strong>Bank of England<\/strong> faces a critical decision. Will it hold firm on <strong>interest rates<\/strong>, or is a shift in its <strong>monetary policy<\/strong> on the horizon?<\/p>\n","protected":false},"author":9,"featured_media":10877,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-10871","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-economy","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33","no-featured-image-padding"],"_links":{"self":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts\/10871","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/users\/9"}],"replies":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/comments?post=10871"}],"version-history":[{"count":0,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/posts\/10871\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/media\/10877"}],"wp:attachment":[{"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/media?parent=10871"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/categories?post=10871"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/en.econostrum.info\/wp-json\/wp\/v2\/tags?post=10871"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}