A business and economics expert Gurpreet Narwan has been taking a look at the unsurprising decision by the Bank of England to hold interest rates at 4.75%. 

She says what was “more striking” was the policy rift starting to emerge on the Bank’s Monetary Policy Committee, with six members voting to hold the rate and three voting for a cut.

“What that reflects is some of the competing challenges that are facing our economy. Inflationary pressure is proving persistent and stubborn, but at the same time economic growth is flatlining, and could really do with a boost,” she says. 

She explains that there have been some “pretty volatile” moves in the financial markets over the past week, and what the markets think is important as it impacts the Bank’s own forecasting. 

Wage growth data released earlier this week, showing wages are rising by 5.2%, is one factor that is causing concern. 

Gurpreet explains that the fear is higher wages in the economy could lead to higher inflation, which is already above the 2% target rate. 

As a result of all of that, she says expectations of rate cuts next year have been reduced. 

“The Bank’s central forecast was for four interest rate cuts in 2025, but markets are now expecting something like two,” she adds.