Interest rates in the United Kingdom may come down more slowly than expected next year after the latest inflation figures were released, showing that the rate went up for the second month in a row in November, at the fastest pace since March.
The rate-setting Monetary Policy Committee, or MPC, at central bank the Bank of England, or BofE, is due to meet on Thursday but the newly-announced inflation rate of 2.6 percent means that a cut in interest rates is unlikely.
The rate of inflation is still well below its peak of 11.1 percent in October 2022, its highest level in 41 years, and has been coming down during the last two years, dipping below the BofE target rate of 2 percent in September, before rising in October to 2.3 percent.
Chancellor of the Exchequer Rachel Reeves said she was aware that the cost of living was still proving a major challenge for many people.
“Today’s figures are a reminder that for too long the economy has not worked for working people,” she said. “I am fighting to put more money in the pockets of working people.”
The rise had been expected by many observers in the aftermath of measures included in Reeves’ first budget as chancellor, delivered at the end of October.
“The chancellor has made a series of irresponsible and inflationary decisions,” said shadow chancellor Mel Stride, from the opposition Conservative Party. “These figures mean higher costs in the shops, less money in working people’s pockets, and risks keeping mortgage rates higher for longer.”
In November, the BofE cut interest rates for the second time this year, down to 4.75 percent, the lowest point in more than a year, and it is hoped that the rate may come down to 4 percent by the end of next year.
In particular, Reeves’ budgetary decision to increase employers’ national insurance contributions has impacted businesses, with many feeling they have no option but to pass on the higher cost to customers by raising prices.
“The MPC will be cognizant of this heading into its final decision of the year,” Sanjay Raja, chief UK economist at Deutsche Bank, told The Guardian newspaper.
“Put bluntly, the MPC is some way away from declaring victory on inflation,” he said.
At the same time, data from the Eurostat agency has shown that November’s inflation rate in the eurozone was 2.2 percent, up from 2 percent in October, but lower than the figure of 2.4 percent recorded 12 months ago.
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