Battle to bring down inflation is being held back by pay rises and bonuses which means it is likely to be at least a year before mortgage interest rises start coming down, say experts CallumCMason reports
they thought inflation could remain high – perhaps falling at a slower pace than the Bank has predicted – and that rate falls may not come until the second half of next year, or even beyond.
“How quickly rates will start to fall will largely depend on the persistence of core inflation. The high and persistent core inflation, and the likely higher wage inflation resulting, in part, from the current wave of industrial unrest, mean we continue to expect inflation to remain persistently above target. Accordingly, [the base rate] might indeed have to stay higher for longer in order to bring inflation back to its 2 per cent target.
He also said other factors, including strike action resulting in higher pay awards, and employment shortages increasing worker leverage for salary increases could make inflation more entrenched. “I would expect the UK to be one of the last countries to cut rates. Some think rates might drop a little in the US in the later part of this year, but in the UK we could not have even finished the hiking cycle, and could be six to nine months behind”.that he thought the Bank of England was “too optimistic” about falling inflation and that if he was right, “the chances of Bank Rate falling in the foreseeable future are low”.
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