Bank of England to keep rates at 16-year high before UK election
LONDON - Britain's central bank looks on course to hold interest rates at a 16-year high of 5.25% on Thursday as underlying inflation pressures prove persistent, depriving Prime Minister Rishi Sunak of a much-needed boost ahead of a July 4 election.
Services price inflation has fallen less than the BoE expected at the time of the last meeting - only declining to 5.7% rather than 5.3% - and private-sector wage growth is almost twice the rate the BoE judges as compatible with 2% inflation. Instead, the expectation is for a repeat of May's 7-2 vote split, when Deputy Governor Dave Ramsden and external Monetary Policy Committee member Swati Dhingra voted for a quarter-point cut.
Financial markets are doubtful about an August rate cut. On Wednesday they priced in only a 30% chance, with a first move more likely in September and a risk of a delay until November, similar to expectations for the U.S. Federal Reserve. Since the start of the election campaign the BoE has been in a self-imposed period of silence, cancelling public events.
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