Andrew Bailey, Governor of the Bank of England, attends the Bank of England Monetary Policy Report Press Conference, at the Bank of England, London, Britain, February 2, 2023.
Pool | Reuters
LONDON — A tight labor market and comparatively slow return to earth for inflation means the Bank of England is likely to press ahead with a further interest rate hike in March, economists suggest.
The market probability of a further 25 basis point increase at the Monetary Policy Committee’s next meeting nudged up past 73% on Wednesday before sliding back to around 66% by Thursday morning, according to Refinitiv data.
related investing news
The U.K. annual inflation rate dipped for a third straight month to 10.1% in January, landing below consensus forecasts, even as high food and energy prices continue to squeeze British households.
Although inflation is coming down, the rate of price increases fell by just 1% between October and January — marking a comparatively small decline compared to those seen in other major economies.
“With the FTSE 100 recently reaching record highs, investors will be somewhat comforted by the direction of travel for prices,” said Richard Carter, head of fixed interest research at Quilter Cheviot.
“However food prices remain a major driver of U.K. inflation, continuing their upwards march in January with an eye-watering 16.8% increase. Food industry bosses have warned that prices will take considerable time to come down.”
Tuesday’s employment figures for December also offered little indication that the labor market is beginning to ease, with unemployment remaining at 3.7%. Growth in average weekly earnings excluding bonuses increased to an 18-month high 6.7% during the final three months of 2022.
Along with the supply-side shortfall, the U.K. is navigating widespread industrial action among public sector workers, as pay increases continue to lag behind inflation.
Bank of England Governor Andrew Bailey last week urged workers and employers to consider the…
Read the full article here
