Brits face interest rates pain in Labour's 'winter of discontent' as pressure mounts on BoE to curb surging inflation... but will it act today?

Brits are facing interest rates pain in Labour's 'winter of discontent' as pressure mounts on the Bank of England to curb inflation.Threadneedle Street will announce its latest decision at noon, with most analysts betting the base rate will be kept on hold at 3.75 per cent.But markets are predicting that the Bank will act soon, with the Middle East crisis sending energy costs spiralling. The Federal Reserve unanimously voted to increase its interest rate last night, while the European Central Bank has already made a move and the Bank of Japan is expected to follow suit. Mortgage-payers are suffering regardless of the Bank's decision as lenders have started pushing up their own interest rates.Meanwhile, motorists are facing up to the prospect of record pump prices, as the impact of sky-high oil costs feed through. The RAC has warned that diesel could break the £2-a-litre barrier in the coming days. The Bank of England will announce its latest decision at noon, with most analysts betting the base rate will be kept on hold at 3.75 per cent. Most analysts are betting the base rate will be kept on hold at 3.75 per cent todayThe grim picture comes amid fears that Chancellor John Healey could hike taxes again at the Budget next month.The public finances have been put under more strain by rising debt interest costs, and the Treasury must also find ways of funding Andy Burnham's multi-billion pound spending commitments. It would be the sixth time in a row that the Monetary Policy Committee (MPC) has kept rates on hold, having stayed the same since December.Experts think policymakers will continue to favour a 'wait-and-see' approach particularly to the Middle East conflict and how it is impacting the UK economy.However, three members of the nine-person MPC – Huw Pill, Megan Greene and Catherine Mann – voted to hike rates to 4 per cent at the last meeting.Markets are pricing in multiple rises over the next year. It comes against a backdrop of rising prices in the UK, with headline CPI inflation increasing to 3.1 per cent in August, from 2.9 per cent.That marked a five-month high and shows CPI inflation has moved further away from the Bank of England's 2 per cent target rate.Many economists are forecasting the cost-of-living to rise further, with households facing another rise in their energy bills from next month, which could prompt the Bank to raise interest rates in the months ahead.Experts pointed out that services inflation – which reflects prices in the UK's dominant industry – stayed at 3.4 per cent in August, indicating a lack of so-called second round effects – meaning things such as wage demands and broader shop price increases.However, inflation is expected to be pushed up when Ofgem's next energy price cap kicks in from October, which will see household energy bills rise by 4% for a typical dual-fuel household.Thomas Pugh, chief economist at RSM UK, said: 'The rise in inflation in August is just the start of a new upward trend as higher energy, food and memory chip prices continue to make their way through supply chains.'We now see inflation peaking at almost 4% in early 2027, before gradually dropping back to 2% in 2028.'The MPC will hold this week, but inflation at 4% is realistically too hot to ignore.'Charlotte O'Leary, associate economist for the National Institute of Economic and Social Research (Niesr), said the MPC will also be paying attention to the recent surge in oil prices, with Brent crude oil rising above 107 dollars a barrel this week.'Nevertheless, with limited evidence of second-round effects so far, we expect the MPC to hold rates on Thursday,' she said. The grim picture comes amid fears that Chancellor John Healey could hike taxes again at the Budget next mont'However, mounting inflationary pressures, alongside resilient growth data, may eventually grant scope to raise rates without materially damaging the economy.'Economists for Pantheon Economics said there is a chance the MPC 'toughens its language' at the next rates announcements 'to open up the possibility of a November hike if energy prices keep ramping up'.'A 4% inflation peak would already be too hot to hold, but further energy price rises could take inflation even higher,' they said.'The MPC needs to be ready.'