Borrowers are unlikely to receive a pre-Christmas present from the Bank of England today.
The UK central bank is widely expected to leave interest rates on hold at noon, at its final meeting of 2024.
According to the money markets, there is barely 1% chance of a cut, and almost 99% certainty that we’ll get a "no change" decision as the clocks strike 12.
That would leave UK interest rates at 4.75%.
Yesterday’s jump in inflation to 2.6%, above the Bank’s target, after a pick-up in wages on Tuesday, has crushed any lingering hopes of a rate cut this month, even though the economy also appear to be weakening.
The past week has seen “a troika of bad economic news for the UK”, says Kathleen Brooks, research director at XTB, who explains: "Firstly, GDP fell for October, secondly, wage growth shot higher and thirdly, inflation is also moving in the wrong direction. Annual headline inflation rose to 2.6% from 2.3% in November, which was mostly down to expected base effects. Service price inflation remained steady at 5% YoY; however, this is still far too high for the BOE to be comfortable with. Pay growth is another concern.
"Private sector pay growth was 5.4% YoY in October, which suggests that the consumer could thwart the BOE’s efforts to bring inflation back to the 2% target rate."
The Bank’s decision comes a day after the Federal Reserve cut US interest rates, but also signalled it expected to lower borrowing costs at a slower rate in 2025.
UK household water bills are to rise by 36%, on top of inflation, over the next five years.
Meanwhile, water regulator Ofwat has announced that this will mean an average increase of £31 per year.
This is below the 44%, or £39 increase, requested by companies in August.
Under the plan, the average bill increase in 2025-26 will be £86 (20%), excluding inflation, with smaller percentage increases in each of the next four years.
Ofwat says the money will fund a £104bn upgradeto the UK’s water intrastructure, to clean up rivers and seas and secure long-term drinking water supplies for customers.
The agenda
• 7am GMT: Water regulator Ofwat to announce how much water companies can increase prices in the next five years
• Noon GMT: Bank of England interest rate decision
• 1.30pm GMT: US jobless weekly claims data
We'll be tracking all the main events throughout the day … |
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