According to the experts, the recent Inflation data won’t “alter” the Bank’s rate decision.
Jeremy Batstone-Carr, European Strategist, Raymond James Investment Services said: “A wide range of influences lay behind the stabilisation in consumer prices over August. An increase in headline prices kept the rate at the Bank of England’s 3.8% forecast, below its upwardly revised and anticipated 4.0% peak this month.
“The fifth successive month of increasing food prices proved an important factor, although rising prices across a host of sectors, including airfares, restaurants and hotels, all contributed.
“Whilst the small dip in underlying prices, excluding energy, food, alcohol and tobacco, is slightly encouraging, the key data informing tomorrow’s Bank of England’s rate decision process relates to services prices, where the pace of increase slowed slightly to 4.7%.
“It is hard to imagine rate-setters lowering the base rate tomorrow against a backdrop of still rising consumer prices, yet the doves on the deeply divided Monetary Policy Committee (MPC) continue to argue that today’s increased prices largely reflect higher wages and large temporary hikes in regulated prices, such as water rates.
“The hawks are less convinced and are likely to argue that rising price pressures, which are expected to peak this month, coupled with growing dissatisfaction over efforts aimed at curbing inflation, risk sending the wrong signal by cutting rates now.
“With September’s CPI inflation report not available until late October, the likely further increase in September’s consumer prices and proximity of the Autumn Budget make it unlikely that the Bank will move again on November 6. Whether the Committee provides further support for hard-pressed households and businesses through another rate cut immediately ahead of the peak festive season in mid-December may depend largely on the outlook for wage growth.”
