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海角视频 inflation rise dampens hopes for December interest rate cut by Bank of England

Inflation jumped to 2.1 per cent in October, according to the Office for National Statistics (ONS), its highest level since the start of the year, and is now expected to rise further

A larger than anticipated surge in inflation last month has essentially dashed hopes of a December interest rate cut by the Bank of England. Economists had predicted that rising energy costs would push inflation beyond the Bank's two per cent target last month, but an unexpected increase in services and core inflation, which excludes fluctuating food and fuel costs, could pose a problem for those setting rates.

Core inflation increased from 3.2 per cent to 3.3 per cent, surpassing the consensus prediction of a drop to 3.1 per cent, while services inflation rose from 4.9 per cent to five per cent. This unexpected turn of events will likely pressure the Bank of England to adopt a more cautious approach to reducing interest rates as the 海角视频 braces for the potential resurgence of sharp inflation following Rachel Reeves's substantial spending Budget in October.

According to its latest projections, the Bank expects Reeves's fiscal plans, which include an additional £30bn in annual spending, to contribute nearly half a percentage point to peak inflation in just over two years. The Bank has consistently stated that it will adopt a "gradual" approach to interest rate cuts over the next year and in response to the latest inflation surprise.

"A gradual approach to removing monetary policy restraint will help us to observe how this plays out, along with other risks to the inflation outlook," Bank governor Andrew Bailey informed MPs this week.

Traders have now scaled back their predictions for rapid interest rate cuts, with markets currently factoring in a ten per cent likelihood of a Christmas cut and as few as three cuts next year, as reported by .

"While we think the Bank of England will continue to cut rates in 2025, the pace of rate cuts is expected to be slower than previously anticipated, and rates may stay elevated for longer," stated Monica George Michail, NIESR associate economist.

Luke Bartholomew, deputy chief economist at Abrdn, cautioned that headline inflation is likely to "drift further above target for the next few month" but the "fundamental determinants of inflation that will determine the path of interest rates from here".

"With the Budget set to boost growth and inflation next year, there is little reason for the Bank to deviate from its only gradual rate cutting schedule any time soon," he added. "So we continue to expect the next rate cut early next year."