Hopes for an interest rate cut during Christmas were dashed by Budget
Hopes of a rate cut before Christmas have all but disappeared amid fears that Labour’s tax and spending budget will push up prices.
Traders reckon there is a one in eight chance that the Bank of England will cut the cost of borrowing, now at 4.75 per cent, when rate setters meet this week.
The Bank fears the £25 billion increase in employer contributions will be passed on to customers, fueling inflation, which is already back above the 2 percent target.
The country’s position is at odds with that of its American and European counterparts, who are cutting interest rates faster and harder.
Looking ahead: Governor Andrew Bailey expects four rate cuts next year, based on market expectations for inflation and growth
The full impact of National Insurance and the minimum wage increase on prices is expected to be felt early in the new year, experts say.
Other measures, especially higher tobacco taxes, are already feeding into headline inflation, which could have reached 2.5 percent in November.
Governor Andrew Bailey expects four rate cuts next year, based on market expectations for inflation and growth, which remain weak as national output shrank slightly last month.
But there was also good news: the fall in government borrowing costs caused some lenders to cut fixed-term mortgage rates.
DIY INVESTMENT PLATFORMS
A. J. Bell
A. J. Bell
Easy investing and ready-made portfolios
Hargreaves Lansdown
Hargreaves Lansdown
Free fund trading and investment ideas
interactive investor
interactive investor
Invest for a fixed amount from € 4.99 per month
Sax
Sax
Get £200 back in trading fees
Trade 212
Trade 212
Free trading and no account fees
Affiliate links: If you purchase a product, This is Money may earn a commission. These deals have been chosen by our editors because we believe they are worth highlighting. This does not affect our editorial independence.