On Thursday, the Bank of England (BoE) policymakers will make a crucial decision on whether to increase or maintain the current interest rates.
It is difficult to predict the outcome, as the markets are evenly split between both possibilities. However, analysts predict that the decision will likely be between keeping the interest rates steady or a 25 basis point hike.
Recent speeches by policymakers suggest that their views are unlikely to change, leading to a split decision. The bank notes that the arguments for either decision are compelling. The UK economy has improved, but growth is still expected to be poor, and households are yet to recover from the impact of last year’s surge in prices.
While inflation is set to fall, it is still high, and core inflation remains stubbornly high. The tight labour market is also contributing to higher wage settlements. Furthermore, the collapse of the US-based Silicon Valley Bank has added an element of uncertainty to the decision-making process.
Despite these challenges, it is expected that the BoE will proceed with a hike on Thursday. The bank believes that falling inflation and weak growth will become apparent by May, leading to the possibility of interest rate cuts in the future.
