Sticky inflation makes Bank of England interest rate cut ‘unlikely’

Inflation remained unchanged at 2.2 per cent last month, with experts saying they now expect the Bank of England to keep the base rate at 5 per cent today.

The Bank’s Monetary Policy Committee will announce at noon its next interest rate decision.

It finally cut the base rate to 5 per cent last month, after holding it at a 16-year high of 5.25 per cent for more than a year.

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This successfully brought inflation down from double-digits to the Bank’s target of 2 per cent, however it has crept up again in the last two months.

The “Taylor Swift effect” may be partly behind the more than doubling in cinemas, theatres and concerts price inflation, which jumped from 4.4 per cent to 9.2 per cent last month, with August seeing the last of her UK dates for the Eras tour. (Photo by ANGELA WEISS/AFP via Getty Images)The “Taylor Swift effect” may be partly behind the more than doubling in cinemas, theatres and concerts price inflation, which jumped from 4.4 per cent to 9.2 per cent last month, with August seeing the last of her UK dates for the Eras tour. (Photo by ANGELA WEISS/AFP via Getty Images)
The “Taylor Swift effect” may be partly behind the more than doubling in cinemas, theatres and concerts price inflation, which jumped from 4.4 per cent to 9.2 per cent last month, with August seeing the last of her UK dates for the Eras tour. (Photo by ANGELA WEISS/AFP via Getty Images)

Economists say yesterday’s Consumer Price Index announcement, which held at 2.2 per cent, means a rate cut is “unlikely”.

The ONS said services sector inflation jumped to 5.6% in August from 5.2% in July as air fares rose across European routes, which offset falls in prices at petrol pumps.

Darren Jones, Chief Secretary to the Treasury, said: “Years of sky-high inflation have taken their toll; and prices are still much higher than four years ago.

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“So, while more manageable inflation is welcome, we know that millions of families across Britain are struggling, which is why we are determined to fix the foundations of our economy.”

David Belle, trader at Fink Money, said there is “no chance of a cut from the Bank of England” today, while Jake Finney, economist at PwC, said the CPI “suggests that a September rate cut is unlikely”.

Mr Finney said: “However, we expect that the latest inflation data will do little to dissuade the Bank from cutting in November, given that headline and services inflation are both tracking lower than their latest externally published forecasts.”

He added that the “Taylor Swift effect” may be partly behind the more than doubling in cinemas, theatres and concerts price inflation, which jumped from 4.4 per cent to 9.2 per cent last month, with August seeing the last of her UK dates for the Eras tour.

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John Choong, head of equities and markets at Investors Edge, commented: "A September rate cut was never in the picture to begin with, but that's especially the case after yesterday’s inflation data, with core inflation seeing its first rise in 15 months.”

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