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The Bank of England is expected to hold interest rates steady at 4.75 per cent on Thursday after it was revealed that inflation in November rose to 2.6 per cent, above the central bank’s target.
The Office for National Statistics revealed inflation had risen to 2.6 per cent from 2.3 per cent, pushed higher by pricier petrol and clothing.
The central bank uses higher interest rates as a tool to try and tame inflation, forcing families to spend more on borrowing rather than pushing up the prices of goods.
Another pressure on inflation comes from rising wages. Pay packets are now growing at 5.2 per cent, up from 4.9 per cent three months ago, according to data from the Office for National Statistics released earlier this week.
Money market traders have pushed back their expectation of a rate cut to May. Previous market activity suggested that a cut could have come in March.
Commercial lenders like high street banks and building societies use the bank base rate as a guide on how much to charge borrowers and how much to reward savers.
Interest rates are expected to be held steady later today after a glut of gloomy economic data, notably that inflation was climbing again and that the economy shrank last month.
Sarah Coles, head of personal finance at stockbroker Hargreaves Lansdown said:
“Inflation is staying put for now, like an unwelcome Christmas party guest hogging the sofa into the small hours. The question is whether it can be shifted, or if it’s going to hang around to ruin our plans for months – eating us out of house and home and driving up the cost of everything again.
“Food and drink price inflation rose to 2%. Poor harvests in a number of areas have pushed up the prices of trolley favourites, including olive oil, up 26.6 per cent in a year and chocolate up 9.9 per cent.”
Howard Mustoe18 December 2024 17:05
