The Bank of England is expected to keep interest rates unchanged for the sixth time this year, but experts said it “needs to be ready” to hike rates if energy prices continue to surge. <\/p>\n
Most economists are expecting the Bank’s Monetary Policy Committee (MPC) to hold rates at 3.75% at its next meeting on Thursday September 17. <\/p>\n
It would be the sixth time in a row that the MPC has kept rates unchanged, having stayed the same since December. <\/p>\n
Experts think policymakers will continue to favour a “wait-and-see” approach particularly to the Middle East conflict and how it is impacting the UK economy. <\/p>\n
However, three members of the nine-person MPC \u2013 Huw Pill, Megan Greene and Catherine Mann \u2013 voted to hike rates to 4% at the last meeting, and economists expect the same outcome at the next one. <\/p>\n
Matt Swannell, chief economic adviser to the Item Club, said: “It looks a near certainty that the MPC will leave Bank rate unchanged at 3.75%. <\/p>\n
“However, we expect divisions among rate-setters to remain, with July’s three hawks \u2013 Huw Pill, Catherine Mann and Megan Greene \u2013 again favouring an immediate rate increase. <\/p>\n
“With the decision largely seen as a done deal, attention will instead focus on the committee’s communications, particularly on whether the doves have moved towards accepting the possibility of future rate rises.” <\/p>\n
UK Consumer Prices Index (CPI) inflation rose to 2.9% in July, up from 2.6% in June and the highest level since March. <\/p>\n
But services inflation \u2013 which reflects prices in the UK’s dominant industry \u2013 fell from 3.6% to 3.4%, indicating a lack of so-called second round effects \u2013 \u00a0meaning things such as wage demands and broader shop price increases. <\/p>\n
However, inflation is expected to be pushed up when Ofgem’s next energy price cap kicks in from October, which will see household energy bills rise by 4% for a typical dual-fuel household. <\/p>\n
Furthermore, new official figures show the UK economy unexpectedly grew by 0.4% in July, with strength coming from parts of the services industry. <\/p>\n
Rising inflation coupled with a strengthening economy could prompt policymakers to raise interest rates in the months ahead, experts suggested. <\/p>\n
Economists for Pantheon Economics said there is a chance the MPC “toughens its language” at the next rates decision “to open up the possibility of a November hike if energy prices keep ramping up”. <\/p>\n
“A 4% inflation peak would already be too hot to hold, but further energy price rises could take inflation even higher,” they said. <\/p>\n
“The MPC needs to be ready.” <\/p>\n
Thomas Pugh, chief economist for RSM UK, agreed that the MPC “would need to respond” if inflation accelerates and feeds through into wages and the prices that firms charge customers. <\/p>\n","protected":false},"excerpt":{"rendered":"The Bank of England is expected to keep interest rates unchanged for the sixth time this year, but…\n","protected":false},"author":2,"featured_media":769368,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[3490,84,86659,3682,59,14169,251052,814,253991,10515,23919,56,1893,54,55],"class_list":["post-769367","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-bank-of-england","tag-business","tag-catherine-mann","tag-energy-prices","tag-gb","tag-headline-inflation","tag-huw-pill","tag-interest-rates","tag-megan-greene","tag-monetary-policy-committee","tag-mpc","tag-uk","tag-uk-economy","tag-united-kingdom","tag-unitedkingdom"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/769367","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=769367"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/769367\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/769368"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=769367"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=769367"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=769367"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}