Borrowers could be breathing a sigh of relief next week as the Bank of England base rate is widely expected to be held at 5.25%.
The bank’s Monetary Policy Committee will announce its decision next Thursday and is likely to hold bank rate for another month.
The base rate has been increased on 14 consecutive occasions between December 2021 and August 2023 – taking the rate from a record low of 0.1% to 5.25%, the highest rate since 2008.
But official figures yesterday showed the UK jobs market is slowing while the private sector suffered a third month of decline.
Against this rather gloomy backdrop, bets on financial markets suggest there is a 90% chance interest rates will remain unchanged next week.
Danni Hewson, AJ Bell head of financial analysis, said: “Changes to the way the numbers are crunched aside, figures out this morning from the ONS show a deteriorating picture in the UK jobs market. This should, in theory, reduce the pressure on the Bank of England to push interest rates higher.”
Marcus Brookes, chief investment officer at Quilter Investors, said: “Looking at the ‘experimental’ data, we can see that unemployment in the UK is remaining stable, for now. However, the fast rise in interest rates is beginning to bite and we are seeing companies scale back hiring and in some cases shed jobs, with the employment rate falling and unemployment rising gradually in the last three months.
“We know that economic growth in the UK is slowing and could potentially turn negative for the fourth quarter, so today’s data provides further evidence that things may be beginning to roll over. For the Bank of England this may be just enough to continue with a pause at its next interest rate decision, having hit the brakes at its last meeting.”
A poll by Reuters found that 61 out of 73 economists predicted there would be no move from the Bank next week, in line with market expectations. Only 12 economists questioned forecast a quarter point rise to 5.50%.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Wage growth is slowing quickly enough for the Bank of England’s interest rate-setting Monetary Policy Committee to keep bank rate at 5.25% next month.”
