Conservatives' Hopes Dashed as UK Interest Rate Cut Unlikely: Economic Stability in Question

Any hopes the governing Conservative Party may have of the Bank of England cutting its main interest rate from a high of 5.25% are expected to be dashed. Despite inflation falling to its target rate for the first time in nearly three years, concerns over service sector prices and wage increases persist.

The governing Conservative Party's hopes for a Bank of England interest rate cut from 5.25%, a 16-year high, are likely to be dashed Thursday.

Even though UK inflation hit the target rate of 2% for the first time in almost three years, policymakers remain cautious. They are wary of rising service sector prices and wage increases potentially rebounding inflation if rates are reduced prematurely.

Luke Bartholomew, deputy chief economist at abrdn, suggested that a rate cut in August is more likely. Meanwhile, Prime Minister Rishi Sunak's early election bet on a stable economic environment shows little effect, with polls indicating a potential Labour victory under Keir Starmer.

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