Although inflation has reached a stage that allows the adoption of a less stringent monetary policy, economists believe that the British Central Bank will, during its meeting on Thursday, keep the key interest rate at 5.25 percent, which is the highest level since 2008.
Inflation fell in May, to 2 percent at an annual level in the United Kingdom, according to official figures published on Wednesday.
In good news for the conservative government in the election battle, price rises hit the level set by the Bank of England for the first time in three years.
But James Harty, an analyst at Tickmill, pointed out that “despite inflation returning to its target, the Bank of England will not cut interest rates at its meeting.”
He said, “Given the upcoming British legislative elections on July 4, the market expects the bank to reduce interest rates in August,” at its next meeting.
Following the announcement of legislative elections, the Bank of England prevented almost all of its members from making statements, so as not to appear as if they wanted to influence the outcome of the vote.
The inflation rate in Britain was the highest among the G7 countries for a long time, but it is now below the inflation rate in the United States and the euro zone.
The rise in prices had slowed in the country in April, to 2.3 percent on an annual level, far from the 11 percent it reached at the end of 2022, and that day led to a severe crisis in purchasing power in the United Kingdom.
The slowdown in food prices is the main factor in this decline. However, inflation in the services sector, which slowed slightly year-on-year in May compared to 5.9 percent in the previous month, is still higher than economists’ expectations.
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