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UK interest rates increase expected after services sector activity accelerates

By · Via The Guardian Business · Published by Everything Blog

In short

The Bank of England is widely expected to lift its benchmark rate by 0.25 percentage points to reach 4% on Thursday. Persistent consumer price increases and an eight-month high in services sector activity have heightened hawkish sentiment among monetary policy committee members. However, while tech and business services thrive, consumer-facing high street retailers continue to grapple with sluggish demand.

Key points

  • A majority of the nine-member monetary policy committee is expected to vote for a rate hi…: A majority of the nine-member monetary policy committee is expected to vote for a rate hike to 4%.
  • Artificial intelligence investments and datacentre-related software services are driving…: Artificial intelligence investments and datacentre-related software services are driving current growth while high street firms struggle.
  • Economists anticipate inflation will peak next spring, likely restricting future policy i…: Economists anticipate inflation will peak next spring, likely restricting future policy increases to just one or two hikes.

Sources checked by our analysis pipeline: 1

The Bank of England is expected to raise interest rates on Thursday after a closely watched survey showed growth across the UK’s services sector leapt last month to an eight-month high, bolstered by spending on artificial intelligence.

S&P Global’s survey of the services sector in October showed businesses regained much of the momentum they lost after the start of the Iran war, but also felt the impact of a renewed spurt of input price inflation, which accelerated to a five-month high.

Officials at the Bank have become concerned about inflation after the consumer prices index (CPI) rose from 3.1% in August to 3.5% in September.

While the nine-member monetary policy committee (MPC), which sets interest rates, has been split in recent months, a majority is expected to vote on Thursday for 0.25 percentage point increase to 4%.

Tim Moore, the economics director at S&P Global Market Intelligence, said a survey of the manufacturing sector earlier this week also showed businesses facing strong price pressures.

He said: “These signals underscore the near-certainty of a Bank of England rate hike in November…

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