UK businesses are freezing hiring plans amid stagnant interest rates and mounting global uncertainty, with the Bank of England keeping rates at 4.5% despite inflation remaining above target.
The Bank of England has maintained its interest rate at 4.5%, despite mounting global uncertainty and inflation remaining above the target of 2%.
The decision was made by the monetary policy committee, which voted eight to one in favor of keeping rates unchanged.
Businesses are freezing their hiring plans due to Rachel Reeves‘ tax increases and mounting global uncertainty.
The Bank’s findings show that employment intentions are now negative, with more firms reporting hiring pauses or freezes.
Industry groups have criticized the chancellor’s planned tax increases, arguing they will stoke inflation.
The committee highlighted the risks from Donald Trump‘s escalating trade wars and energy costs, which could impact businesses and consumers’ confidence.
The Bank is closely monitoring developments in the global and domestic economies to ensure that inflation stays low and stable.
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Official figures show unemployment remaining at 4.4% with pay growth stuck at historically high levels.
However, the Office for National Statistics has cautioned against the reliability of its official figures due to difficulty compiling its survey since the pandemic.
Inflation remains above the Bank’s target, having increased from 2.5% in December to 3% in January.
Inflation is a sustained increase in the general price level of goods and services in an economy over time.
It is measured as an annual percentage increase in the Consumer Price Index (CPI).
A moderate inflation rate, around 2-3%, is considered healthy for economic growth.
However, high inflation can erode purchasing power and reduce the value of money.
Factors contributing to inflation include monetary policy, supply and demand imbalances, and external factors such as global events or natural disasters.
The Bank has signalled that borrowing costs are likely to be reduced further, but economists believe rates may need to be held higher for longer to squeeze persistent inflationary pressures despite a slowdown in economic activity in the second half of last year.
