Interest rates

Experts predict Bank of England may wait to raise interest rates

Experts predict the Bank of England may delay hike in interest rates this week to wait and see the impact of the Omicron variant and ‘Plan B’ restrictions on the economy amid fears of soaring inflation

  • The Bank of England’s monetary policy committee will meet on Thursday this week
  • Committee to make final decision on whether to raise interest rates
  • Experts believe MPC may delay hike while waiting to see Omicron impact on UK
  • Bank of England under pressure to hike rates to curb spike in inflation










Experts believe the Bank of England may suspend interest rate hikes this week in order to wait and see what impact the Omicron coronavirus variant and ‘Plan B’ restrictions will have on the economy.

The Bank’s monetary policy committee is due to meet on Thursday after being under pressure for months to hike rates to curb the spike in inflation.

The MPC took financial markets by surprise in November by choosing to keep rates unchanged.

The bank was generally expected to push the button of a 0.1% to 0.25% hike this month to curb inflation.

But many economists and investors believe that the recent emergence of Omicron and the government’s decision to impose “Plan B” restrictions have increased the likelihood that the Bank will wait again before acting.

Experts believe Bank of England may put interest rate hikes on hold this week to wait and see what impact the Omicron coronavirus variant and ‘Plan B’ restrictions will have on the economy

Bank of England Governor Andrew Bailey said in November he was

Bank of England Governor Andrew Bailey said in November he was “very worried” about inflation levels.

The consumer price index inflation measure stood at 4.2 percent in the 12 months ending October of this year, down from 3.1 percent in September.

Bank of England Governor Andrew Bailey said in November he was “very worried” about inflation levels.

The Bank has repeatedly stated that it expects high inflation levels to be temporary, predicting a return to its 2% target over the next few years.

Mr Bailey told MPs last month he thought it would make sense to wait and see the impact on the economy of the end of the holiday in September before making the decision to raise rates. interest.

The MPC’s decision on interest rates on Thursday is expected to be a close call among bank policymakers.

Martin Beck, chief economic adviser of the EY Item Club, said: “The new Omicron Covid-19 variant complicated the MPC’s December decision.

“New restrictions globally threaten to further delay supply chains, while consumers and businesses could reasonably expect to become more prudent in their spending.

“If Omicron’s economic impact turns out to be greater than expected, an interest rate hike at the December meeting may need to be quickly reversed.

“In light of this, the argument for the MPC not to increase the discount rate this year and wait to see what the economic landscape looks like when it next meets in February 2022 is a solid one.”

JP Morgan’s Allan Monks said he believes the latest restrictions could lower monthly economic output by about 0.5% in December and January.

This adds to the supply chain problems, which are already hampering the UK’s economic recovery.

He said: “The impact on confidence will be significant – people canceling some spending plans for the future and voluntarily becoming more cautious in their behavior.”

But the bank faces a difficult balancing act as pressure intensifies to help bring inflation down to its 2% target.

Wednesday’s official figures are expected to show a further rise in inflation – to 4.8% from 4.2%, according to Pantheon Macroeconomics.

BNP Paribas experts believe the majority of the MPC will still vote for a rate hike, although they admit the vote will be “finely balanced”.

They said: “The spread of the Omicron variant has added an additional element of uncertainty to the near-term outlook, which makes such a decision less convincing.

“However, we believe that the majority of the Committee will be convinced by the economic data, which clearly justifies the start of the tightening process.”

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