Bank of England expected to leave interest rates unchanged, says top economist

15 March 2024 , 14:58

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The Bank of England is expected to keep interest rates unchanged when it meets on Thursday (Image: PA Wire/PA Images)

The Bank of England's Monetary Policy Committee (MPC) is expected to keep interest rates steady when they announce their decision on Thursday.

The committee will meet during the week to see if the economy is showing signs that it's time to start cutting rates. However, experts believe that only one member out of nine is likely to think conditions are right for a cut.

The Bank has hinted in recent meetings that rate cuts may be on the horizon, after four years of either increasing or maintaining rates. In their last meeting in February, only Swati Dhingra voted for a rate cut, two members voted for a rise, while the rest agreed to keep them at 5.25%.

Robert Wood, chief UK economist at Pantheon Macroeconomics, expects the same voting pattern this time. He said: "The MPC focuses on the ‘tightness of labour market conditions, wage growth and services price inflation’ to judge ‘how long Bank Rate should be maintained at its current level’,” he said.

“We think the data have not surprised enough to trigger a change in guidance at the MPC’s meeting on March 21. The Bank will continue signalling rate cuts, but with little new as regards timing. We expect the same 1-6-2 (cut-hold-hike) vote as last month.”

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Since the last meeting, data has shown that the UK's economy shrank by 0.3% in December, pushing us into a recession. This was worse than what the Monetary Policy Committee (MPC) had predicted. Unemployment and inflation have also been lower than what the MPC expected in its February forecast.

Mr Wood added: "Overall, the data since the MPC’s last meeting confirm – rather than challenge – its forecasts. That is all that is needed for the BoE to remain on course for summer rate cuts. In February, the MPC forecast inflation would fall to 1.4% at the two-year forecast horizon if it kept interest rates restrictive at 5.25%. Policymakers just need the confidence to trust those forecasts.”

The new Consumer Prices Index inflation figures for February will be released on Wednesday by the Office for National Statistics and the Bank will look at these before coming to a decision on interest rates.

Lawrence Matheson