Bank of England to Keep Rates Steady

The Bank of England is expected to keep interest rates unchanged at 3.75% on Thursday, as policymakers wait for clearer evidence that inflation is under control despite growing concern about the labor market. Markets see less than a 1% chance of a rate cut and most economists expect a 7 to 2 vote to hold, with only Alan Taylor and Swati Dhingra likely to support a reduction. Inflation remains elevated at 3.4% but is forecast to fall to the 2% target in the second quarter, keeping hawkish members cautious. At the same time, unemployment has risen to 5.1% and redundancies have increased, raising concerns about economic weakness. Recent data has been mixed, with stronger GDP growth, solid retail sales and improving business activity offset by labor market deterioration. Governor Andrew Bailey is expected to back a hold while signalling further gradual easing ahead, with markets pricing about a 70% chance of the next rate cut in April.