1 month ago
Bank of England to Hold Rates Amid Oil Price Surge
The Bank of England is expected to keep interest rates at 3.75% despite recent increases in oil prices.
While some economists think rates might go up later this year, others believe inflation is under control.
The Bank is watching closely to see how higher oil prices affect the economy.
Prime Minister Andy Burnham wants to focus on reducing living costs, but higher borrowing costs could make that harder.
The Bank is also looking at how selling bonds affects the financial markets.
Bank of England expected to hold interest rates at 3.75% despite rising oil prices.
UK inflation fell to a 15-month low of 2.6% in June.
Economists differ on future rate hikes, with some expecting increases in September or November.
BoE chief economist warns of potential higher inflation expectations due to oil price shocks.
BoE to analyze the impact of bond sales on financial markets before September's vote on the pace of sales.
- Who
- Bank of England, Prime Minister Andy Burnham, Economists, Financial Markets
- What
- Decision to hold interest rates despite rising oil prices
- Where
- United Kingdom
- When
- Thursday, with future decisions expected in September or November
- Why
- To monitor inflation and economic stability amid rising oil prices and geopolitical tensions
Economists Expecting Rate Hike
Economists Against Rate Hike
Rate Hike Expectations
Economists Expecting Rate Hike
Some economists and financial markets expect a rate hike in September or November due to rising oil prices.
Economists Against Rate Hike
Only a small number of economists expect rates to increase this year, citing recent downside surprises in inflation and labor market slack.
Inflation Forecasts
Economists Expecting Rate Hike
The BoE's chief economist warns that a second oil price shock could lead to higher inflation expectations.
Economists Against Rate Hike
The BoE has lowered its inflation forecast to just over 3.25 per cent, indicating a more stable inflation outlook.
Key facts
- Current Interest Rate
- 3.75%
- Current Inflation Rate
- 2.6%
- Expected Rate Hike Probability
- Two-in-three chance in September
- BoE Inflation Target
- 2%
- Quantitative Tightening Pace
- £70 billion per year
Quotes
Henry Cook
Senior economist at Japan’s MUFG
“"We’ve had three downside surprises now in a row on inflation and plenty of signs of slack within the labour market,"”
easterneye.biz
Costas Milas
University of Liverpool professor and co‑author of BoE bond‑sale research
“"If we just ignore QT or pause QT ... perhaps the BoE might have to raise Bank Rate earlier than it possibly has in mind,"”
easterneye.biz
Sources
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