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Are interest rates about to rise?

The Bank of England. Credit: PA

On Thursday the Monetary Policy Committee of the Bank of England decides as it does this time every month whether or not to raise interest rates.

I expect no change to rates.

This is because although raising interest rates would ordinarily be considered a sensible strategy to get inflation down – and inflation is now running at 2.9% which is considerably higher than the Bank of England’s 2% inflation target – the economy is simply too fragile right now for Committee members to risk putting rates up.

We had confirmation on Wednesday that for the first three months of the year wages have been falling in real terms.

The Office for National Statistics reported a fall of 0.6% in average wages.

This is the worst news on wages in almost three years.

This will have a significant negative effect on growth and comes off the back of other weak economic data in recent days and weeks, including evidence of falling consumer confidence and business confidence, and of falling retail sales.

Then of course there is the domestic political uncertainty we are currently experiencing as well as the unknown course Brexit will now take.

All of this is putting additional pressure on an economy which is already slowing down and vulnerable.

If rates were put up right now this could be incendiary putting a further burden on borrowers, further sapping business confidence, and squeezing consumers even more which is why I expect no change on Thursday.