CPI rises to 2.6% to extinguish BoE interest rate cut hopes as economy stumbles
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Any realistic chance of another Bank of England base rate cut this year was crushed this morning after official data added to fears of an inflationary resurgence. The consumer price index rose from 2.3 per cent in October to 2.6 per cent last month, according to the Office for National Statistics, as closely watched services inflation continued to prove sticky at 5 per cent.
![[ING expects services inflation to ease towards 3% by the Spring]](https://i.dailymail.co.uk/1s/2024/12/18/09/93265861-14204941-ING_expects_services_inflation_to_ease_towards_3_by_the_Spring-a-1_1734513524631.jpg)
The rise in CPI, which was in line with market forecasts, hit its highest in eight months and follows a reading of 1.7 per cent, when it fell below the bank's target of 2 per cent. Market pricing has now all but ruled out any chance of a BoE rate cut on Thursday, with traders now predicting just two cuts of 25 basis points each to come next year.
This would take base rate from its current level of 4.75 to 4.25 per cent at the end of 2025, marking a stark contrast to market forecasts for the US Federal Reserve and the European Central Bank, which investors think will be more aggressive. Price rises were felt broadly across the British economy in November, with core inflation – which excludes energy, food, alcohol and tobacco – rising from 3.3 to 3.5 per cent.
Bank of England Governor Andrew Bailey weighs slowing economic growth with sticky inflation. It follows stronger than expected wage growth data published on Tuesday, and weakens the argument for more aggressive rate cuts to counteract slowing economic growth.
Michael Field, European equity market strategist at Morningstar, said: 'The explanation for the [CPI] rise in October was down to an increase in the energy price cap, but the fact that inflation continued to rise in November means there is likely more to the story.'.
