Achi news desk-
Borrowers in the UK keen to see costs come down may have to wait a little longer for interest rates to drop.
The Bank of England’s Monetary Policy Committee (MPC), which sets the level of UK interest rates, will announce its latest decision on Thursday.
However, economists widely expect the committee to keep rates at the current level of 5.25 per cent, which it has held since August last year.
This means it could still be some time before the cost of living pressures begin to ease.
At the last meeting in March, only one member of the MPC, Swati Dhingra, voted for reducing rates by 0.25 percentage points, but the other eight members voted in favor of no change.
Philip Shaw, chief economist at Investec, said: “This broad direction shows that the committee is collectively moving steadily towards a rate cut.
“However, it looks unlikely to be ready to bite the bullet again and it looks like the Bank rate will be held at 5.25 per cent for the sixth meeting in a row.”
He added that it is possible that a second member of the MPC will switch to the “ease camp” and vote in favor of a cut on Thursday.
Interest rates are being used as a tool to help reduce UK inflation, which has fallen sharply from peaks hit in 2022 when energy costs rose and the cost of living crisis was at its height.
The Consumer Price Index (CPI) inflation rate fell to 3.2 per cent in March, according to the latest official figures.
But experts suggested that two key economic indicators for the Bank of England – wage growth and inflation in the services sector – have remained more stubborn.
Average wages continued to rise faster than the rate of inflation last month.
Andrew Goodwin, chief UK economist for Oxford Economics, said: “The data published in mid-April for services inflation and regular private sector wage growth are likely to wipe out any remaining hopes of a move in May.
“Although both measures have continued to fall, the increase has been slightly slower than the MPC had predicted, and they are currently running slightly above the forecast published in February’s Monetary Policy Report .”
He said it was likely to be a “close call” whether the MPC decides to cut rates in June or August.
Investec’s Mr Shaw said he expected CPI inflation to have fallen to the target level of 2 per cent in May, which would encourage the MPC to cut interest rates to 5 per cent when they next meet in June.
Economists at HSBC also expect the first rate cut to come in June.
The Bank of England will shed more light on its predictions for the economy and the path of interest rates when it publishes the latest Monetary Policy Report alongside the rate decision on Thursday.
Meanwhile, the central bank in the United States, the Federal Reserve, said on Wednesday that it was keeping its key interest rate at the same level and indicated a “lack of further progress” towards reducing inflation.
It means that rates could remain higher for longer until there is more solid evidence of easing price rises, suggested its chairman Jerome Powell.
Additional reports from the Press Association.
