In the latest episode of our Citrus Bites series, Richard breaks down the Bank of England’s decision to leave interest rates unchanged at 5%. While recent rate cuts have come from both the European Central Bank (ECB) and the U.S. Federal Reserve, the UK has decided to hold steady for now. Here’s a closer look at why this decision was made and what it could mean for you.
Inflation: A Key Factor
Inflation continues to play a major role in central bank decisions. In August, the Consumer Price Index (CPI) remained at 2.2%, just slightly above the Bank of England’s target of 2%. This is a stark contrast to the double-digit inflation rates we saw in October 2022. However, core inflation, which excludes volatile items like food and energy, is proving to be more persistent, rising to 3.6% from 3.3% the previous month. The driving factor? Rising airfare costs, which were up 22% in August.
Average Weekly Earnings Remain High
Average weekly earnings in the UK, excluding bonuses, grew by 5.1% in the May-to-July period. In the public sector, the figure was even higher at 5.7%, thanks to recently negotiated pay deals. Although we’ve seen some easing in job vacancies, with over 800,000 roles still available, wage growth remains strong, contributing to inflationary pressure.
Unemployment Steady
Despite economic concerns, unemployment remains stable at 4.1%. Although job vacancies have decreased from the highs of over 1.3 million earlier this year, the current level still indicates a healthy labor market, supporting wage growth and inflation.
What’s Next?
While the Bank of England decided not to make any changes this time, it’s clear that inflation, especially core inflation, will continue to be a key focus. The next rate decision is scheduled for November 7th, and we’ll be covering the outcome in another Citrus Bites video. Be sure to subscribe to our channel for the latest updates.
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