Policymakers held interest rates at 4.5 percent on Thursday as they warned of rising economic uncertainty. Households are also bracing for higher utility costs starting next month.
Britons are bracing for a burst of higher inflation for much of this year as many household bills jump next month, a revival of the cost-of-living pressures that have squeezed household budgets in recent years.
Next month, the average annual energy bill is set to rise 6.4 percent as the price cap resets. Water bills, which are also regulated, will climb an average 26 percent. At the same time, prices for services like broadband internet and cellphone, which often reset at the start of a new fiscal year and are linked to inflation, are rising about 6 percent.
April is also the start of a new tax year, with employers facing higher taxes on their employees’ wages.
Britain’s annual inflation rate is expected to peak at 3.7 percent in the third quarter of this year, accelerating from 3 percent in January, the Bank of England forecast. The central bank, which held interest rates on Thursday at 4.5 percent, has been cautious in its approach to lowering rates because of signs of stubborn price pressures, like robust wage growth and the prospect that a boost in government spending this year and next could also keep prices lofty.
Though there has been evidence that inflation was returning to the bank’s 2 percent target, the uncertainty policymakers face has grown substantially in recent weeks because of the threat of a global trade war and governments in Europe quickly rethinking their budgets to accommodate increased spending on defense.
“There’s a lot of economic uncertainty at the moment,” Andrew Bailey, the governor of the Bank of England, said in a statement on Thursday. Policymakers, he added, are watching domestic and global economic changes “very closely.”