The City believes that the Bank of England is less likely to cut interest rates tomorrow, following the release of this morning’s inflation report which showed a rise in core inflation in August. The odds of the BoE making no change to borrowing costs have increased to 73% this morning, up from 65% before the report. Monica George Michail, associate economist at NIESR, stated that the Bank will likely note that underlying inflation remains elevated, reducing the chances of a rate cut. Additionally, UK rents have soared by 8.4% in the 12 months to August, while UK house price inflation slowed in July.
In other news, Google has won a legal challenge against a €1.49bn antitrust fine imposed by the EU, while retailer Asda has announced a leadership shake-up with Sir Stuart Rose taking control. The pound has risen as the odds of a surprise interest rate cut fade, with experts predicting that rates will remain unchanged at the next meeting.
Despite today’s inflation report, experts believe that the Bank of England will not cut interest rates tomorrow. Ruth Gregory, deputy chief UK economist at Capital Economics, stated that the Bank is likely to pause and leave rates unchanged, with a rate cut expected in November instead. Professor Costas Milas of the University of Liverpool argues that recent public sector pay deals could push up inflation, suggesting that the BoE should keep interest rates unchanged for the time being. Additionally, with the Fed expected to lower US interest rates this week, the BoE may allow for international cuts to strengthen UK growth without taking action itself.
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