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Friday, May 09, 2025

Monetary Policy Committee Expected to Raise Interest Rates Amidst Increasing Inflation

Monetary Policy Committee Expected to Raise Interest Rates Amidst Increasing Inflation

The Bank of England's Monetary Policy Committee (MPC) is expected to raise interest rates by 25 basis points to 4.75% at their next meeting on June 22, following a rise to 4.50% in March, due to inflation falling to 8.7% in April, which is still above the MPC's 2% target.
However, inflation rose in the core categories, from 6.2% in March to 6.8% in April, which suggests that the MPC has little option but to continue its tightening cycle.

Economists warn that there is a high probability of another hike in early August.

The cost of living is becoming increasingly difficult for low-income families, with food inflation rising at an eye-watering rate of 19.1% in April, down only slightly from 19.2% in March.

The IMF has warned that interest rates in Britain will likely have to rise further and remain high for longer to get a firm grip on inflation.

The Chancellor of the Exchequer, Jeremy Hunt, welcomed the "big upgrade" to the UK's growth forecast, which he said "credits our action to restore stability and tame inflation." However, the economic pain faced by millions of families was laid bare by food inflation remaining eye-wateringly high.

The UK saw a significant increase in grocery spending during the week of the coronation, with sales of wine and quiche soaring.

However, the country's overall food price inflation was the second highest among the G7 group of wealthy nations.

The Chancellor met with food manufacturers to discuss ways to support consumers amid rising food prices, while the Government's borrowing soared to a near-record level due to higher debt interest and energy support schemes.

Central government receipts decreased while spending increased, with a rise in social benefits and cost-of-living financial support.

The private sector's growth slowed in May, falling short of expectations according to a flash UK purchasing managers' index.
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