The Bank of England is widely anticipated to raise interest rates on Thursday following new data indicating robust growth in the UK services sector during October. A survey by S&P Global revealed that activity in the sector reached its highest level in eight months, with particular strength tied to spending on artificial intelligence technologies and related services.
The services purchasing managers’ index climbed to 52.8 from 52.1 in the previous month, indicating expansion across the sector. This rebound comes after businesses experienced setbacks following the start of the Iran war. The survey also showed that companies added staff during October, marking the end of two consecutive years of workforce reductions that had been driven by elevated labor and operational costs.
Inflation remains a key concern for policymakers. The consumer prices index rose from 3.1% in August to 3.5% in September, prompting heightened attention from monetary officials. Input price pressures have also intensified, with the latest survey indicating that approximately four in ten service providers reported increased costs for materials and inputs. Service sector output price inflation measures suggest underlying inflation could be running around 4.1% annually.
The nine-member monetary policy committee is expected to vote for a 0.25 percentage point increase in interest rates to 4% on Thursday. While the committee has been divided on policy direction in recent months, a majority now appears positioned to support this move. Financial markets are pricing in three additional rate increases, though many economists predict inflation will peak in the spring, potentially limiting the total number of further hikes to one or two.
Economists note a divergence in the recovery, with business-to-business services showing strength while consumer-facing sectors continue to struggle amid subdued consumer confidence. This uneven growth pattern, combined with persistent cost pressures, is shaping expectations for monetary policy direction into 2027.
Article Attribution | Read More at Article Source
Article summary produced by Claude AI