Bank of England Expected to Hold Interest Rates as UK Unemployment Falls

AI Summary

The Bank of England is expected to keep interest rates unchanged at 3.75% today, as the UK economy faces challenges from the Iran war and rising energy costs. UK unemployment has fallen to 4.9%, with more people finding work or leaving the labour market.

The Bank of England's Interest Rate Decision

The Bank of England is widely expected to leave interest rates unchanged at 3.75% at noon today, after its latest monetary policy committee meeting.

Policymakers at the BoE will try to balance the challenge of containing imported inflation from the Middle East conflict, while avoiding intensifying the squeeze on firms and consumers who have been hit by the rise in energy costs.

With the economy shrinking slightly in April, and inflation lower than forecast in May, a hike in borrowing costs appears unnecessary. The City of London money markets indicate there’s a 98% chance that interest rates are left on hold, and just a 2% chance of a rise.

UK Unemployment Falls

Unemployment across Britain has fallen back, as more people either found work or dropped out of the labour market.

The UK unemployment rate dipped to 4.9% in the three months from February to April, down from 5% a month ago, easing fears that the energy crunch could drive up job losses.

The Office for National Statistics reports that the number of people unemployed dropped by 105,000 in the quarter to 1.764m.

The Agenda

7am BST: UK labour market data
Noon BST: Bank of England interest rate decision
1.30pm BST: US initial jobless claims
1.30pm BST: Philadelphia Fed Manufacturing Index