High inflation and slowdown signs: the BoE's tough trade-off
© Reuters. FILE PHOTO: A pedestrian walks past the Bank of England in the City of London, Britain, September 25, 2023. REUTERS/Hollie Adams/File PhotoLONDON - The Bank of England is expected to keep interest rates at their 15-year high on Thursday as it battles an inflation rate that is more than three times as high as its target, despite growing signs of strain in the economy.
Below is a series of graphics showing the trade-off facing the central bank as it tries to get inflation down to its 2% target without pushing the flat-lining economy into a recession.Consumer price inflation hit 11.1% in October 2022, which was higher than in comparable economies, and it has fallen more slowly too. It held at 6.7% in September. There was a fall in core inflation, excluding volatile fuel and food costs. But service price inflation, which the BoE watches closely, rose.
However, the BoE issued a forecast in August saying inflation would return to 2% only in the second quarter of 2025. It is due to publish new forecasts on Thursday.The fastest pay rises in at least 22 years have eased only slightly, according to official data. There are other, clearer signs that the jobs market is losing some of its inflationary heat, such as slower growth in starting pay for people hired via recruiters.
A measure of consumer confidence fell sharply in October as the cost-of-living squeeze weighed heavily on households.The BoE said in August it was likely to keep interest rates high to ensure inflation is squeezed out of the economy, and its chief economist Huw Pill has likened the outlook to the flat and long summit plateau of Table Mountain.
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