"Today's figures are not good viewing for those hoping for a cut to interest rates when the Bank of England's Monetary Policy Committee meets tomorrow. With wage growth and services inflation running hot, the MPC is very likely to keep rates on hold. However, given the economy is growing slower than desired, we expect at least one more interest rate cut before the end of the year - as long as inflation doesn't escalate much further."
"This tension, between a labour market that refuses to soften and an economy edging toward stagnation, defines the policy dilemma. GDP growth is anaemic, with the ONS showing only a modest rebound after the flatlining of early summer. Business investment surveys point to hesitation as higher borrowing costs bite. Consumer confidence remains fragile. Yet wage settlements and hiring plans tell the Bank that demand is far from extinguished."
Inflation pressures remain stubborn, with headline consumer inflation at 3.8% in August, unchanged from July and twice the Bank of England's 2% target. Wage growth and services inflation are running hot, keeping the labour market tight and reducing the likelihood of an immediate rate cut. GDP growth is anaemic, business investment is hesitant and consumer confidence is fragile, creating a policy dilemma between cooling demand and supporting growth. Financial markets have priced in a pause at a 4% Bank Rate, with gilt yields rising and sterling firming. At least one further rate cut is expected before year-end if inflation does not escalate.
Read at London Business News | Londonlovesbusiness.com
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