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\t\tAndrew Bailey, Governor of the Bank of England, has spoken about his job market worries ahead of the next interest rates decision. Photo credit should read: Alberto Pezzali\/PA Wire\t<\/p>\n
The Bank of England is unlikely to signal faster interest rate cuts at this Thursday\u2019s meeting, leading economists have said, leaving the future of monetary policy in the balance.\u00a0<\/p>\n
Monetary Policy Committee (MPC) members are widely expected<\/a> to agree to cut interest rates by 25 basis points to four per cent.\u00a0<\/p>\n But City analysts have suggested that the future of interest rates thereafter will be harder to predict unless the Bank alters its \u201cgradual and careful\u201d approach to rate-cutting<\/a>.\u00a0<\/p>\n James Smith, UK economist at ING, said policymakers have been left in an \u201cuncomfortable\u201d position given a conflicted picture of the UK economy.\u00a0<\/p>\n Rising inflation to hamper further rate cuts <\/p>\n Prices rose higher than expected to 3.6 per cent<\/a> in the year to June, while the jobs market has shown a further deterioration, with the unemployment rate climbing to 4.7 per cent<\/a> from 4.4 per cent earlier this year.\u00a0<\/p>\n These clashing data points are likely to make MPC members \u201creluctant to entertain the possibility of faster rate cuts\u201d, according to Smith.\u00a0<\/p>\n \u201cThere\u2019s no smoking gun that might prompt a fundamental rethink in the Bank\u2019s outlook just yet,\u201d he said, adding that services inflation of 4.7 per cent was higher than the Bank\u2019s forecast and likely to keep economists at Threadneedle Street awake at night.\u00a0<\/p>\n \u201cThe fact that so many prices are set annually in April means that we\u2019ll have to wait until next spring to see a more material improvement.\u00a0<\/p>\n \u201cUntil then, [services inflation]\u2019s likely to stay north of four per cent which is an awkward place to be for the Bank.<\/p>\n \t\t\t\t\tRead more<\/p>\n \t\t\tBank of England policymaker urges faster interest rate cuts<\/a><\/p>\n \u201cOfficials are concerned that when inflation reaches these levels, it is more likely to become embedded.\u201d<\/p>\n City analysts have suggested that the MPC is poised for a three-way split, with chief economist Huw Pill<\/a> set to vote for interest rates to be held and two dovish members, Swati Dhingra and Alan Taylor, set to vote against the consensus by opting for a 50 basis point cut.\u00a0<\/p>\n Self-described \u201cactivist\u201d member Catherine Mann\u2019s next move is also being closely watched, given she voted for interest rates to be held in May when borrowing costs fell to 4.25 per cent.\u00a0<\/p>\n In February, she voted for a 50 basis point cut, also against the majority view to cut interest rates by 25 basis points.\u00a0<\/p>\n Interest rates could be cut once<\/p>\n The split is likely to reflect the MPC\u2019s \u201cfinely balanced decision\u201d on cutting rates to four per cent, Deutsche Bank\u2019s Sanjay Raja said, with hawkish views at the Bank putting further interest rate cuts at risk.\u00a0<\/p>\n Raja has held his prediction of three rate cuts over the next 12 months, while markets see interest rates settling around 3.5 per cent.\u00a0<\/p>\n Some analysts have suggested interest rates could fall to three per cent.\u00a0<\/p>\n