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Inflation to remain steady and interest rates held – Daily Business

3 days ago admin

*Inflation is likely to show little movement (pic: Bank of England)*

UK inflation rose higher than expectations in April to 3.5% from the 2.6% in March and is not likely to change much when figures are released on Wednesday.

The Office for National Statistics (ONS), which publishes the data, was forced to admit that the figure had been overstated due to an error in car tax data, revising it down to 3.4%.

Bank of America economists said in a note on Friday that that the May consumer prices index (CPI) will come in at about 3.3%.

Growth in prices drives interest rate decisions and despite the current rate being well above the Bank of England’s 2% target the base rate of borrowing is expected to be unchanged at 4.25% when it announces its decision on Thursday.

Analysts expect the rate will be cut in August and again in November. The Bank’s own forecasts have inflation rising to 3.7% in the coming months before falling back to the 2% target in early 2026.

At last month’s meeting the Bank’s monetary policy committee voted by a majority of five to four to reduce the headline interest rate to 4.25%. Two members voted to reduce by 0.5 percentage points to 4%, while two members preferred to maintain base rate at 4.5%.

One of those members voting for a half-point cut was Alan Taylor, who expressed concern about the deteriorating UK economy and said he is advocating for deeper cuts ahead of market expectations.

*The Bank of England is likely to leave rates unchanged (pic: Terry Murden)*

JP Morgan Asset Management’s global market analyst Zara Noakes said: “One would expect price pressures to dissipate as the labour market falters, but until there is clear evidence of cooling inflation in the hard data, the Bank should stay firmly on hold.”

The US Federal Reserve is also due to announce its next interest rate decision this week and despite pressure from Donald Trump for a cut it is also expected to opt for no change.

Among corporate announcements, consultancy firm Accenture delivers third quarter figures on Friday. Its shares fell on the back of its second quarter results in March, after it warned of the impact of US federal spending cuts on its business.

For the third quarter, Accenture expects revenue to be in the range of $16.9bn to $17.5bn, which would represent growth of 3% to 7%.

Premier Inn owner Whitbread reported a softer start to its current financial year, with UK accommodation sales down 1% in the first seven weeks of trading.

However, the company said its forward booked position was ahead of last year, helped by “strong peak leisure demand”.

For its UK food and beverage business, which includes steakhouse chain Beefeater, Whitbread said sales in the first seven weeks were 16% behind the previous year, but explained that this reflected the removal of a number of lower-returning brand restaurants and was in line with its expectations.

The focus on Berkeley will be on whether the housebuilder has any updates on its cash return plans with the current aim of returning £283.5m to shareholders via a mix of buybacks and dividends.

DIARY

Monday 16 June