The Bank of England is set to keep interest rates on hold today despite mounting alarm at the stalling economy. The Monetary Policy Committee is expected to keep the base rate at 4.75 per cent when its latest decision is announced at noon. The verdict is due after figures showed inflation increased in November for the second month in a row, with wages also gathering pace again.
But at the same time there are fears that UK plc could slip into recession following Rachel Reeves' huge Budget tax raid. The economy has contracted for two consecutive months, while closely-watched business surveys have shown activity flatlining. Interest rates, which influence how much banks charge for loans and mortgages, are used as a tool by the central bank to keep inflation at its 2 per cent target level.
However, after drifting downwards from historic peaks the headline CPI hit to 2.3 per cent in October and 2.6 per cent in November. Most economists think the latest data, and the prospect of price pressures increasing in the coming months, will persuade the Bank's policymakers to hold interest rates at their current level.
The rate was reduced in August and again in November, and until relatively recently there were hopes of another drop before Christmas. Traders in the financial markets are expecting about a 10 per cent chance of a rate cut, Investec Economics said on Wednesday.
