The Bank of England is expected to reduce interest rates amid high unemployment and identification tariffs England Bank
It is widely expected to reduce the policymakers of the Bank of England this week to prevent the economy to prevent unemployment and hit global trade from the new Donald Trump tour of import tariff.
City traders are betting that the MPC’s monetary policy committee will reduce the headline rate on Thursday by 0.25 percent to 4 %, which represents the fifth reduction since last August and restoring interest rates to where it was in March 2023.
Financial markets put an opportunity to reduce at the August meeting by more than 80 % and give up a quarter of another point before the end of the year.
Chancellor Rachel Reeves will welcome this step, which will lead to a decrease in the prices of real estate loans and reduce the cost of borrowing for companies that suffer from financial hardship.
However, the decision is likely to clarify the difficult situation facing the UK as the government is struggling to increase growth while trying to reduce spending on Whitehall before the autumn budget.
The economy has shrunk in May by 0.1 % and in April by 0.3 %, which many economists threw in uncertainty caused by Trump’s tariff and additional work taxes in the budget last October, which came into effect in April.
In a sign of the weakest growth during the next year, the number of vacancies decreased to less than the prenatal level and the unemployment rate increased to 4.7 % in the three months to May, reaching the highest level since June 2021.
Trump signed a trade agreement with the definitions that limit the UK to most goods to 10 %, but on Friday the US President announced an additional import tariff for commercial partners by up to 50 %, which would harm global growth.
The International Monetary Fund (IMF) recently said that the British economy will face more than 0.1 % in the third and fourth quarters of the year, before a slight increase in the rate of separation to 0.3 % next year.
MPC will publish new forecasts on Thursday, which can be more depressive, indicating that the stagnation period is imminent, causing slowdown during the next year while inflation is still high.
Consumer price index (CPI) increased by 3.6 % in the year to June, according to the latest official numbers, much higher than MPC goal by 2 %.
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Matt Swaniel, the chief economic advisor at EY ITEM, said that the increase in vacant jobs and high unemployment showed that the labor market was weakening while wage growth had been cooled more quickly than the Bank of England expected.
But he expected a division of MPC vote after leap in the inflation in June.
He said: “The signs of continuous price pressures mean that the committee is still cautious, as it is expected that two members of MPC hawks will prefer any change.”
The inflation increased by more than one -month -old Bank of England after large increases in the cost of some basic elements such as meat and butter.
“The increase in food prices is especially important for MPC as it feeds on families inflation – one of the main measures of the committee about the risk of continuing inflation,” Swaniel added.