The Bank of England is heading into a finely balanced decision on whether to lower interest rates again as softer than expected inflation and a weakening labour market prompt some policymakers to argue for lower borrowing costs.
Traders are betting that the BoE’s Monetary Policy Committee, which meets this week, is likely to keep rates on hold at 4 per cent as it attempts to bring inflation back down to the 2 per cent target. Markets imply a less than one-third chance of a quarter-point reduction on Thursday.
But some analysts are predicting a split decision as some rate-setters warn of the risk of holding rates too long in the face of rising unemployment and sluggish GDP growth. The prospect of a tough Budget in November has also added to arguments for easing monetary policy.