LONDON: As the UK economy faces multiple challenges, all eyes are on the Bank of England this Thursday as it’s expected to maintain its 5.25% interest rate.
With economic indicators signaling weakness and the looming possibility of a recession, the central bank’s past forecast downgrades and concerns from economic agents about subdued activity will weigh heavily on this report.
The key question now is whether the Bank will predict an impending recession, though past forecasting errors should be considered.
This report coincides with the one-year anniversary of the Bank’s warning of a potential lengthy recession, prompting the appointment of former US Federal Reserve chair Ben Bernanke to review its forecasting process.
It’s also been almost a year since the Bank significantly raised rates, with the situation starkly different today.
The recent decision to keep rates unchanged reflects a pause after 14 consecutive hikes, mainly due to the impact on the economy and easing inflation.
Experts suggest that Thursday’s meeting will likely result in unchanged rates, with limited new data to sway opinions.
However, the departure of one policymaker and recent economic data, including softer GDP, weaker retail sales, and consumer confidence, have some believing the case for further rate hikes may be weakening.
The overall picture hints at an economy in the early stages of a potential recession, exacerbated by uncertainty in the jobs market due to methodological changes in employment and unemployment data collection.
Bank of England hikes interest rates by 25 basis points to 4.25%
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