Bank of England governor Andrew Bailey alluded to the “uncertainty” caused by Labour’s October Budget as officials predict zero growth for the end of 2024.
The Bank chose not to lower interest rates on Thursday after stubborn inflation rates climbed up from 2.3% in October to an eight-month high of 2.6%
The Bank’s monetary policy committee voted to hold interest rates – the price of borrowing – at 4.75%.
It means UK interest rates will now be higher than in the US and Eurozone going into the new year.
Bailey explained that the decision was motivated by a “heightened uncertainty in the economy”.
He pointed to some of Reeves’ more controversial decisions like increasing national insurance contributions for employers – to raise £25bn – as well as the hike to national living wage.
A survey from the Bank found businesses are increasing prices and cutting jobs in response – news which will come as a blow to Labour, as the government has made growing the economy its central mission.
Bank staff now expected zero GDP growth in the final three months of 2024, which is weaker than the 0.3% they had predicted in November.
Bailey was hesitant about predictions for next year, too, and refused to say when interest rates might go down.
Bailey said: “I think the path is downward but I really would caution that at this stage, with the amount of uncertainty, we can’t tell you by how much or when particular moves are going to take place.
