Inflation Alert: MPs Might Keep Rates Sticky

Economists are sounding an alarm that consumer prices could lift off above the 3% mark in the months ahead. If that happens, the Bank of England’s Monetary Policy Committee (MPC) may find its hands tied when it comes to cutting interest rates.

Why the BoE’s 2% Target Might Be a Harder Hurdle

Fuel Fuels the Numbers – Energy costs are spiking, and that’s a direct hit on household bills.
Food, Food, Food – Better or worse, groceries are no longer savings-friendly.
Broader Living Costs – When everyday essentials climb, the inflation story changes.

Voices from the Economic Trenches

Andrew Goodwin, chief UK economist at Oxford Economics, told Bloomberg: “We already had a feeling inflation would beat the BoE’s forecast, but the recent energy price surge means it’ll likely be even higher.”

Dan Hanson, lead UK economist at Bloomberg Economics, added: “The real question for the BoE is what to prioritise if inflation overshoots the target while unemployment climbs. That inflation episode just proved expectations can drift, people.”

The Bigger Picture

With inflation on the ascent and job numbers potentially wobbling, the MPC’s next moves will be a lot more about balancing act than simply lowering rates.

Takeaway

Inflation >3%? Bank of England might be forced to keep the rates where they are.
Rising fuel and food prices? They’re turning the budget into a tightrope.
Economists say: “It’s a game of expectations and reality.”

CBI chief warns the Chancellor has created ‘a hole in confidence and trust’ for businesses

Will Reeves’ Chancellorship Ever Go on Brand?

BBC News reports that Starmer is not exactly handing over the throne to Reeves on a permanent, pink‑pajama‑style contract. The former Attorney General appears to be keeping his options open – or perhaps, staying in the guest room of politics.

Reeves: The Free Agent

Rees called it “a short‑term—maybe the best of a worst‑case” arrangement.
He thinks the UK needs someone who can handle “the other side of the Sixties” and not just the summer parties of the 1970s.
Reeves made it clear that he wants to stay a “stranger” until something else is settled.

Starmer’s Take

The Prime Minister has sidelined the chances that Reeves will lock into a long‑term deal.
He wants period (temporarily?) and persistent future as Chancellor including news that they’re looking to keep Reeves in the role until the next election.
He’s also offering a private “seat on the desk” for Reeves – a breeze for his political aspirations.

In other words, it’s a chess move (or a “chess move?”). Will the reigning Chancellor make his way into a new programme? Right now, they’re continuing to walk through his future – but it’s not as locked in as the last election’s winner list.

Tory MP warns Labour has ‘killed’ the economy ‘stone dead’ and there’s ‘no easy way out’

Britain’s Currency on a Tightrope: The Pound’s 8% Dilemma

Bank of England, Inflation, and a Not-So-Friendly Trump Policy

The Bank of England is feeling the pinch after a sudden shock that’s left the business confidence as fragile as a paper bag in a storm.
“The central bank will probably have to keep cutting policies gradually rather than making a dramatic move,” Deutsche Bank’s chief UK economist Sanjay Raja warned, as a brewing storm of higher gas and electricity prices threatens to push inflation above 3%.

Energy Prices are creeping up at the petrol pump.
Higher food costs seep into everyday budgets.
Inflation expectations might balloon, which could rattle policymakers.

Raja said, “The United Kingdom’s biggest worry is that the rise in inflation at the start of the year could tighten expectations just as tightly.”

Market Speculation: Is the Pound Slumping?

Traders are eyeing a potential 8% fall for the pound as government borrowing takes its toll. Bloomberg reported a robust appetite for contracts that pay out when the currency dips below $1.20, signalling a shift to a more pessimistic outlook. Some speculators are even betting on a slump past $1.12 — the lowest level in over two years.

Jamie Niven, a fund manager at Candriam, thinks the next move will likely see a further dip.
Tony Redondo of Cosmos Currency Exchange sees the pound sliding to $1.15.
“The dollar could see a freefall too,” he added, citing recent stellar employment data that suggests the US Federal Reserve may cut rates slowly in 2025.

Why the Euro Might Hold Steady

“Against the euro, the slump should be more muted,” Redondo noted, due to stagflation fears and political gridlock in Germany and France. “But the dollar? That’s a different story.”

He further warned that Trump’s upcoming inauguration, coupled with potential tariff plans, could further dent the UK and eurozone economies, driving the pound to 1.15 or lower against the greenback.