Summary
Inflation in the UK has increased more than expected, complicating the Bank of England's decision on whether to reduce interest rates next month. The Bank may delay plans to lower rates in August, as inflation remains above its target, but still anticipates a rate cut later in the year if inflation drops as expected.
Key Facts
- Inflation in the UK has risen faster than predicted and is higher than the Bank of England's target.
- The current interest rate is 4.25%, and there was an expectation to lower it in August.
- Higher inflation makes it harder for the Bank of England to decide on rate cuts.
- Economist Andrew Sentance suggested that cutting rates now would be "irresponsible."
- A decline in the jobs market could encourage an interest rate cut if unemployment continues to rise.
- Unemployment is expected to increase to 4.9% from last month's 4.6%.
- Other major economies, like the eurozone, have lower inflation rates, with the eurozone at 2%.
- The UK economy is not in a recession, though growth is slowing down.
