Omicron hangs over Bank of England’s rate decision

Omicron hangs over Bank of England’s rate decision

LONDON: The Bank of England will likely hold its interest rates at their current record lows tomorrow as it weighs runaway inflation against the possible economic impact of the Omicron coronavirus variant. Initially, analysts had expected the BoE to raise its key rate from the current level of 0.1 percent in a bid to rein in inflation, which surging energy costs have pushed well above target.

However, Omicron, which emerged late last month, has forced the UK government to re-impose coronavirus restrictions and sparked fresh economic turmoil which most analysts believe will persuade the BoE to hold its fire. UK inflation rocketed to a near decade-high of 4.2 percent in October, and is set to top 5.0 percent in April according to a BoE official.

Central banks normally raise borrowing costs to dampen inflation, which is running beyond the BoE’s target of 2.0 percent. Prime Minister Boris Johnson has, however, warned of a looming “tidal wave” of Omicron that could overwhelm the state-run National Health Service (NHS). Policymakers will also be mindful of upbeat UK unemployment data and upcoming inflation numbers for November today. Unemployment has fallen again, despite the end of a government scheme to keep millions of private-sector workers in