Bank of England Economist Huw Pill advises caution in reducing interest rates due to ongoing inflation concerns.
Inflation: Current Situation
According to Trading Economics, the UK's annual inflation rate unexpectedly dipped to 2.5% in December. However, the Bank of England expects inflation to rise to 3.7% later this year and gradually decrease to the 2% target by the end of 2027. Policymakers maintain a cautious approach to rate cuts due to potential inflation risks.
UK Economic Growth Prospects
Last week, the Bank of England halved its 2025 growth forecast to 0.75%. BBC reports indicate slight economic growth in late 2024, but the forecast remains uncertain due to new business taxes. Business investment decreased by 3.2% in the final quarter, alongside declines in employment and consumer spending.
Response to Economic Data
Chancellor of the Exchequer Rachel Reeves vowed to overhaul the UK economic strategy in response to the economic data. She announced plans to boost infrastructure investment and eliminate business obstacles under the 'Plan for Change' reform initiative.
Economic experts believe that the current inflationary environment requires a cautious monetary policy approach to stabilize the economy and ensure sustainable growth.
