As the Bank of England prepares for another interest rate decision next Thursday, market predictions seem to be leaning towards no changes until a potential cut in the upcoming autumn. This comes amidst anticipation of the Autumn Statement.
Laith Khalaf, head of investment analysis at AJ Bell, said: “Discretion may well be the better part of valour for the Bank of England as it faces its next interest rate decision. Inflation is still uncomfortably high, but it’s heading in the right direction.
“We’ve also seen signs of the labour market cooling, a key metric which suggests domestic inflationary pressures are subsiding.”
Highlighting the unpredictability of future rate hikes, he continued: “There are still risks to the inflation outlook, not least the conflict in the Middle East and a rising oil price, so further rate hikes can’t be entirely ruled out.”
Khalaf also drew attention to the changing focus in the financial sphere: “We may well have already hit the peak in interest rates, and if that’s the case, it won’t be long before attention turns to when the Bank might decide to loosen the purse strings with rate cuts.”
Reflecting on the wider implications, he added: “The UK is now closing in on almost two years of interest rate hikes, from a base of almost zero. With the Autumn Statement coming up, the chancellor won’t be thanking financial markets for pushing up bond yields over the course of this year.”
