The inflation rate in the United Kingdom is projected to decrease to the Bank of England’s long-term goal of 2% during the second quarter of 2024. However, this reduction may only be brief, as the Bank suggests inflation could climb once more subsequently.
Reasons for a potential resurgence in the inflation rate include escalating shipping expenses due to issues in the Red Sea, higher minimum wages, and an increase in business rates. The inflation statistics for February are scheduled to be made public on March 20, and the Bank’s Monetary Policy Committee (MPC) will announce its decision on interest rates the following day, March 21.
Susannah Streeter, who leads money and market analysis at Hargreaves Lansdown, remarked that there is an expectation for inflation to continue to fall, with a swifter decrease anticipated in the upcoming months. Nonetheless, she noted that Bank of England policymakers are likely to maintain higher interest rates for the time being, waiting for more proof of a decline in wage growth before considering a reduction in rates.
The expectation is for a cut in the base interest rate to occur in either June or August, as predicted by Hargreaves Lansdown. Streeter mentioned that while a cut in June is possible, a rate reduction in August might be more probable, coinciding with the release of the summer monetary policy report. She pointed out that the hesitancy to lower rates sooner, especially with the economy’s weak growth, could lead to inflation falling below the target and slow economic recovery. Policymakers, for now, seem willing to accept this risk.
