Hopes of a pre-Christmas interest rate cut have all but been extinguished amid fears that Labour’s tax-and-spend Budget will push up prices.
Traders reckon there is a one-in-eight chance the Bank of England will trim the cost of borrowing, now at 4.75 per cent, when rate-setters meet this week.
The Bank fears the £25 billion rise in employers’ National Insurance contributions will be passed to customers, fuelling inflation, which is already back above its 2 per cent target.
Its stance is at odds with that of its US and European counterparts, who are cutting rates faster and harder.
Looking ahead: Governor Andrew Bailey expects four interest rate cuts next year, based on market expectations for inflation and growth
The full effect of the National Insurance and minimum wage rise on prices is expected to be felt early in the New Year, experts say.
Other measures, notably higher tobacco duty, are already feeding through to headline inflation, which could have hit 2.5 per cent in November.
Governor Andrew Bailey expects four interest rate cuts next year, based on market expectations for inflation and growth, which remains anaemic with national output shrinking a little last month.
But there was some good news, as a dip in Government borrowing costs saw some lenders cut fixed-term mortgage rates.
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