The Bank of England (BoE) is under pressure ahead of its August meeting, as top economists urge caution on interest rate cuts despite market expectations of a 0.25% reduction.
Robert Wood, UK economist at Pantheon Macroeconomics, warned that recent job market data may not reflect true economic weakness. Although official figures show a 0.6% drop in payrolled employees in June, Wood pointed to falling inactivity rates and strong wage growth — signs that inflationary pressure remains.
> "The MPC would be well advised to steer clear of assuming employment is falling fast," he said.
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Pantheon expects rates to remain above 3.75%, but concedes a cut is likely due to market momentum and policymakers' dovish tone.
Other forecasters disagree. Capital Economics predicts rates will fall to 3%, citing a faster-than-expected drop in headcounts. ING and EY ITEM Club suggest the Bank stick to its gradual 0.25% cut pace.
Inside the BoE, divisions are widening. Three MPC members voted for a cut in June, while Governor Andrew Bailey has voiced concern about labour market weakness.
For small businesses, the decision could directly affect borrowing costs, hiring plans, and inflation management in the months ahead.
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