Hopes for a rate cut before the election will fade this week as economists warn that lower borrowing costs later this summer are “not a done deal either.”
The Bank of England is expected to keep interest rates at 5.25 percent when its Monetary Policy Committee meets on Thursday.
It would be the seventh consecutive time that rates have remained at their highest level in 16 years.
Experts say Rishi Sunak’s decision to call a surprise general election has made it easier for the Bank to set rates. The Bank, which is independent, does not want to be accused of taking sides during the election campaign, they add.
“The political context would make a rate cut before the election unnecessarily complex,” said Stefan Koopman, an economist at investment bank Rabobank.
Complex: Experts say Rishi Sunak’s decision to call a surprise general election has made it easier for the Bank to set rates
Calls to cut rates have grown as inflation – which peaked at 11 percent after the invasion of Ukraine – falls toward the Bank’s 2 percent target.
But the Bank is still not convinced that inflation is under control, especially in the services sector, where prices rose 6 percent in April.
Sanjay Raja, chief economist at Deutsche Bank, said the bank will want evidence that inflation is approaching “levels consistent with the target.” He added that an August rate cut is not a “done deal.”
