According to the latest data from the Office for National Statistics (ONS), UK inflation has held steady at an annual rate of 2.2%. This remains slightly above the Bank of England’s (BoE) 2% target. Falling fuel costs and reduced prices in restaurants and hotels offset higher airfares.
Last month, the BoE cut its main interest rate by 0.25% to 5%, marking the first reduction since the COVID-19 pandemic. Since then, central banks worldwide have raised borrowing costs significantly, responding to rising prices caused by supply chain disruptions during the pandemic and soaring energy costs since Russia’s invasion of Ukraine.
While economists expect the BoE to leave interest rates unchanged following its policy meeting on Thursday, many anticipate a further cut in November. This would likely follow the Government’s budget announcement on 30 October, which is expected to focus on addressing a £22 billion deficit in public finances.
The Government has indicated potential tax increases and spending cuts to stabilise the economy. These measures could put downward pressure on inflation in the near term and affect economic growth.
The Monetary Policy Committee is expected to wait for the budget’s impact before considering further policy changes, making an interest rate cut this week unlikely.
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