Bank of England on guard against spiking inflation

LONDON: The Bank of England is expected to stay the course on interest rates and stimulus on Thursday, despite soaring inflation and fears of runaway domestic energy costs.

The British central bank's monetary policy committee is likely to keep its key rate at a record-low 0.1 percent.

Annual inflation surged in August to a nine-year high of 3.2 percent after the pandemic-hit economy reopened.

Policymakers will be mindful of Britain's flat recovery, and the impact of the end of the government's furlough jobs support scheme next week.

The recovery slowed sharply in July, as rising coronavirus cases and supply shortages offset a further lifting of lockdown restrictions.

"Recent downside news on economic activity will counterbalance the upside news on inflation," said Pantheon Macro analyst Samuel Tombs, predicting no change in policy from the BoE.

The British central bank has warned that inflation could soon strike 4.0 percent -- double its target -- impacted by a global supply crunch that was sparked by the pandemic.

Yet the BoE argues that high inflation will be temporary, echoing the US Federal Reserve and the European Central Bank.

Wholesale gas prices, however, have soared this week to a record high, sparking fears of rocketing energy bills as demand peaks during the cold northern hemisphere winter.

The UK economy rebounded 4.8 percent in the second quarter, but grew by an anaemic 0.1 percent in July.

On Wednesday, the US Fed said that while increasing Covid-19 cases have slowed the US economic recovery, it may be ready to "soon" start removing stimulus.

The economy has healed to the point that the central bank may slow the pace of its massive monthly bond purchases "if progress continues broadly as expected", the policy-setting Federal Open Market Committee (FOMC) said in a statement after concluding its two-day meeting.