Bank of England to make interest rates decision on Thursday – here’s what’s set to happen

Wed Sep 18 17:38:00 UTC 2024: ## UK Inflation Remains Steady, but Services Inflation Remains a Concern

**LONDON** – The latest UK inflation figures released this morning showed the headline inflation rate remained steady at 2.2%, in line with predictions. While this news provided some relief, underlying price pressures, particularly in the services sector, remain elevated.

Despite the stable headline figure, core inflation and services inflation both saw slight increases in August. This increase, while anticipated, is a cause for concern for the Bank of England’s Monetary Policy Committee (MPC), who are aiming to bring inflation back to the 2% target.

Services inflation, a major focus for the MPC, rose to 5.6% in August, up from 5.2% the previous month. This increase was attributed in part to ‘base effects’ and volatile components like airfare, which rose by a record 22%.

While the MPC’s measures of underlying services inflation often exclude these volatile elements, the overall trend remains a concern. The recent rise in services inflation is expected to be temporary, but the MPC believes it is still too high.

The labour market continues to be tight, with regular pay growth exceeding 5% and unemployment dropping to 4.2%. This suggests that the Bank of England will maintain interest rates at their current level tomorrow.

Despite the current situation, economists predict a gradual moderation in inflation and other economic indicators throughout the year, potentially leading to at least one more interest rate reduction later this year.

While a rate cut in November seems likely, the future trajectory of interest rates remains uncertain. Economists believe that a swift rate cut is unlikely, as maintaining relatively high interest rates is a contributing factor in curbing inflation.

However, the latest data suggests that lowering interest rates further will not necessarily trigger a rebound in inflation. The MPC is expected to carefully analyze the data and make decisions based on the overall economic landscape.

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