Economists believe the Bank of England’s Monetary Policy Committee (MPC) will hold interest rates at 4.25% on Thursday.
Rising food inflation and the threat of oil prices rising amid the Iran-Israel war will push up the cost of living which will no doubt make the MPC to vote to keep interest rates at 4.25%.
The latest data from the Office for National Statistics (ONS) shows that food and non-alcoholic drinks have seen a surge in prices by 4.4% in the year to May.
The Consumer Prices Index (CPI) came at 3.4% in May higher than the 3.3% economists had forecasted.
Monica George Michail, associate economist for the National Institute of Economic and Social Research (Niesr) said for the rest of the year they are forecasting inflation to remain above 3%.
They said that this is also due to “persistent wage growth and the inflationary effects from higher Government spending.
“Additionally, the current tensions in the Middle East are causing greater economic uncertainty.
“We therefore expect the Bank of England to keep rates on hold this Thursday and implement just one further cut this year”.
Sandra Horsfield, an economist for Investec said that the Chancellor’s employer national insurance has not yet been passed on to consumers.
She said, “other uncertainties remain, not least with respect to US tariffs and the indirect impact this will have on UK firms.
“The risk to energy prices has clearly intensified and moved up the agenda given developments in the Middle East.
“It seems unlikely the MPC will want to change policy rates this week.
“But we think Wednesday’s data keep another rate cut at the subsequent MPC meeting in August firmly on the table.”
