Ekonomické zprávy
11.12.2024

Bank of England likely to hold rates steady amid cautious approach

The Bank of England (BoE) is expected to keep its bank rate unchanged at 4.75% on Dec. 19, adopting a slower pace in adjusting borrowing costs compared to other major central banks. Unlike the European Central Bank (ECB) and U.S. Federal Reserve, both poised for imminent rate cuts, the BoE remains cautious due to persistent inflation concerns tied to Britain’s labor market and new fiscal policies.

While price growth has slowed, BoE Governor Andrew Bailey noted inflation may remain slightly above the 2% target until 2027. Recent government spending increases, coupled with tax hikes on employers, have added inflationary pressures, though some businesses plan to pass on costs, potentially reducing hiring. A recruitment industry report already indicates a downturn in hiring activity.

Investors predict only a 10% chance of a December rate cut and expect three cuts totaling 75 basis points by the end of 2025. By contrast, the ECB is anticipated to implement six cuts over the same period, lowering rates by 150 basis points to counter weak growth in the eurozone.

The BoE's gradualist stance could shift if Britain’s labor market shows further signs of softening. Data from tax authorities and vacancy figures, due Tuesday, will be critical in assessing economic conditions.

JP Morgan economist Allan Monks highlighted the BoE’s strong signaling of a measured approach but acknowledged that sustained labor market weakness could pressure policymakers to act more decisively.

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