UK: High inflation threatens interest rate cut prospects

VTV.vn - The prospect of the Bank of England (BoE) continuing to lower interest rates later this year is facing a major challenge, as inflation in the country continues to trend high.

UK inflation remains at 3.8% for three consecutive months - Photo: AFP

The Bank of England's prospects of further interest rate cuts later this year are facing major challenges, as inflation in the country has continued to trend high in recent months.

New data released by the UK authorities shows that the consumer price index (CPI) rose 3.8% in September compared to the same period last year. This is the third consecutive month of CPI increase in the UK, and also marks 12 months of inflation being above the BoE's 2% target. Service price inflation - an important BoE measure - also remained unchanged at 4.7%. According to experts, this is a signal that persistent inflation continues to be a big problem for the UK economy and the rate of forecasting the BoE to cut interest rates at the upcoming November meeting is quite low, although the agency can still cut again in December.

After the data was released, traders raised the odds of a BoE rate cut at its December meeting to more than 60%, up from 40%, according to market expectations. The odds of a BoE rate cut next month rose to about 35%, from 14% before the data was released.

The yield on two-year government bonds, which are sensitive to interest rate expectations and move inversely to consumer prices, fell 0.08 percentage point to 3.77 percent in morning trading on October 22.

Inflation held at 3.8%, against expectations of a rise, is welcome news for Finance Minister Rachel Reeves as she plans her autumn budget next month.

Last week, the International Monetary Fund (IMF) predicted that British households will face the highest inflation rate in the Group of Seven (G7) leading industrialized nations this year and next.

Official figures last week showed the UK economy grew by 0.3% in the three months to August, unchanged from second-quarter GDP but slower than the 0.7% growth in the first quarter.

Source: https://vtv.vn/anh-lam-phat-cao-de-doa-trien-vong-ha-lai-suat-100251023101808028.htm