'No interest rise' as inflation holds steady

Economists said the Bank of England would be unlikely to raise interest rates in the near future after official data on Wednesday showed the UK's inflation rate remained well below the government target.

Pound coins illustrate an article about the latest UK interest rates
Figures from the Office for National Statistics (ONS) put the Consumer Price Index for last month at 1.5%, the same as in October. The government's target is 2% and the CPI was last lower in November 2016.

UK unemployment rates drop

The figures came a day after employment data from the ONS surprised analysts by showing the number of unemployed in the UK in the three months to October had dropped to 1.28 million, its lowest level in 44 years.Most analysts had been expecting a rise in the jobless total amid all the political uncertainty surrounding Brexit. Instead, the number of people in work increased by 24,000 to 32.8 million, representing an employment rate of 76.2%.Commenting on the latest inflation figures, Mike Hardie, head of inflation at the ONS, said, "The headline rate of inflation remained steady with prices rising across a variety of goods and services such as chocolate, concert tickets and package holidays, offset by falling hotel costs and cigarette prices rising substantially slower than this time last year."

UK wages are still rising faster than inflation

ONS data this week have also shown that wages are still rising faster than inflation. Total pay growth, including bonuses, stands at 3.2%, with basic pay increasing at a rate of 3.5% annually.The Bank of England's Monetary Policy Committee (MPC) will meet on Thursday to decide on any change in interest rates. Ruth Gregory, an economist at Capital Economics, commented, “With inflation well below target, little sign of underlying price pressures and GDP growth running below trend, an interest rate cut on Thursday shouldn’t be completely ruled out.“Even so, coupled with yesterday’s robust labour market figures, the pressure on the Bank of England to cut interest rates at its meeting tomorrow appears to have eased somewhat.”Yong Jing Teow, chief economist at PwC, said the below-target level of inflation meant that the Bank of England would be "under little pressure to raise its policy rates soon".She added: "However, a recovery next year that follows a further easing of political and economic uncertainties could spur further economic activity and spending, giving rise to inflationary pressures in the medium term. “Yael Selfin, chief economist at KPMG UK, predicted that inflation would stay low next year, potentially allowing the MPC to cut borrowing costs."Inflation is expected to remain well below the Bank of England’s target in 2020, thanks to price caps set on regulated utilities and a stronger pound, giving the Bank of England some room to act if the economy wobbles a little next year," she said.“The Bank may wish to secure a pre-emptive cut in rates, either in February or May, if recent economic weakness proves more persistent."

UK house prices

Meanwhile, a separate ONS report on Wednesday showed UK house prices in October increased at their slowest annual rate in more than seven years.Across the UK as a whole, prices increased at an annual rate of 0.7 per cent, bringing the average property price to £233,000. Regionally, rises were highest in Wales, and Yorkshire and Humber at more than 3%. In London, prices fell by 1.6% over the year.Estate agents, however, are expecting a pick-up across the country in the New Year now that months of political uncertainty appear to have been resolved by last week's general election.Lucy Pendleton, founder director of estate agent James Pendleton, said: "New inquiries for property picked up the day of the election result and foreign buyers are matching their domestic counterparts for renewed enthusiasm."

Read more news and views from David Sapsted

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