Bank of England to pause interest rates as inflation jumps
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The Bank of England is poised to keep interest rates on hold after inflation surged to an eight-month high and households were told to brace for further price rises. Hopes that the Bank could deliver pre-Christmas interest rate cuts were all but abandoned after the Office for National Statistics (ONS) said the consumer prices index increased for the second month in a row to 2.6pc in November.
It means inflation is now at its highest level since March and drifting further from the Bank of England’s target of 2pc. The rise means the UK now struggles with a higher rate of inflation than rivals like the US, Germany and France. It came as the Federal Reserve slashed borrowing costs in the US for the third time this year, just days after the European Central Bank also lowered borrowing costs.
Economists warned that UK consumers face further inflation pain as businesses pass on the impact of Rachel Reeves’s record-raising Budget. The Chancellor in October launched a £26bn raid on National Insurance contributions paid by employers as well as raising the minimum wage by 6.7pc.
Sanjay Raja at Deutsche Bank said: “Price pressures are resurfacing again – with employers likely to start ramping up prices at the start of the year to account for the employer NICs increase. “Put bluntly, the Monetary Policy Committee is some way away from declaring victory on inflation.”.
Responding to the figures, Ms Reeves said she recognised “families are still struggling with the cost of living”. She added: “I am fighting to put more money in the pockets of working people. That’s why at the Budget we protected their payslips with no rise in their national insurance, income tax or VAT, boosted the national living wage by £1,400 and froze fuel duty.”.
