High inflation and slowdown signs: the BoE's tough trade-off

investing.com:

By William Schomberg and Sumanta Sen

LONDON (Reuters) — The Bank of England is expected to keep interest rates at their 15-year high on Thursday as it battles an inflation rate that is more than three times as high as its target, despite growing signs of strain in the economy.

British inflation remains the highest among the world's rich economies, and the BoE's run of 14 back-to-back interest rate increases between late 2021 and August this year to contain it is hitting the housing market, jobs and consumer spending.

Below is a series of graphics showing the trade-off facing the central bank as it tries to get inflation down to its 2% target without pushing the flat-lining economy into a recession.

HIGH INFLATION FALLS SLOWLY

Consumer price inflation hit 11.1% in October 2022, which was higher than in comparable economies, and it has fallen more slowly too. It held at 6.7% in September. There was a fall in core inflation, excluding volatile fuel and food costs. But service price inflation, which the BoE watches closely, rose.

Governor Andrew Bailey said the figures were not far off the BoE's expectations. Economists expect a big fall in headline inflation in October as last year's energy price surge fades from the comparison.

However, the BoE issued a forecast in August saying inflation would return to 2% only in the second quarter of 2025. It is due to publish new forecasts on Thursday.

PAY GROWTH — SOME SIGNS OF COOLING

The fastest pay rises in at least 22 years have eased only slightly, according to official data. There are other, clearer signs that the jobs market is losing some of its inflationary heat, such as slower growth in starting pay for people hired via recruiters. Gauging the labour market has been made