The Bank of England is expected to hold interest rates steady at 4.5% amid rising inflation and economic uncertainties stemming from U.S. tariffs and potential tax hikes by Chancellor Rachel Reeves. The Monetary Policy Committee (MPC) faces a complex situation where careful observation of inflation data is crucial, especially the recent increase in the Consumer Prices Index (CPI). Analysts anticipate that greater clarity will emerge soon, but immediate concerns over service inflation and the impacts of government policy remain paramount in shaping the economic landscape.
But the 0.2 percentage points downside surprise in the services inflation rate, the stickiness of which has presented the main concern for the MPC even as overall inflation has fallen, will have been met with some relief.
Murky as the picture looks now, some things will become a lot clearer soon. The fog of uncertainty is an unavoidable constant in economic forecasting.
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