Bank of England set to slow pace of interest rate hikes

LONDON (AP) — Britain’s central bank is expected to make its ninth straight interest rate hike on Thursday, though it’s likely to be smaller than last month’s outsized hike as inflation shows signs of easing..

Most economists expect the Bank of England to raise its key rate by half a percentage point to 3.5%. This would put it in line with the US Federal Reserve, which raised its key rate by the same amount on Wednesday. The Swiss central bank followed suit a day later, and the European Central Bank is also expected to approve a similar increase on Thursday.

Britain’s central bank voted last month to raise its key rate by three-quarters of a point, to 3%, the biggest increase in three decades. He justified the aggressive move by saying it was necessary to fight stubbornly high inflation that is eroding living standards. and could trigger a prolonged recession.

Central banks around the world have battled to get inflation under control, but Bank of England policymakers face added pressure to strike the right balance as Britain’s economic outlook is worse than any other major economy.

The high cost of food and energy is eroding the purchasing power of UK households as employers face pressure to raise wages to keep pace with inflation amid wave of nationwide strikes by nurses, train drivers, postal workers, paramedics and others.

The Bank of England forecast last month that inflation would peak at around 11% in the last three months of the year, down from 10.1% in September. He said inflation should then start to slow next year, falling below the bank’s 2% target within two years.

There were early signs that the price spikes were abating, although inflation was still stuck near a 40-year high. Annual consumer price inflation fell to 10.7% in November from 11.1% the previous month, official data showed on Wednesday.

“Overall, inflation is past its peak and will continue to fall from here. This will bring a sigh of relief” at the Bank of England headquarters, said Paul Dales, UK chief economist. United at Capital Economics.

But policymakers cannot be complacent as the UK economy is proving resilient and wage growth remains strong, he said in a research note.

“So interest rates will go up further, but the Bank will probably raise them at a slower pace” and they will hit a lower level than expected, Dales said.

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