THE case for pausing rises in UK interest rates is “looking more convincing”, says a leading think-tank which believes the peak this cycle has already been reached.

The EY ITEM Club declared yesterday: “Unexpected falls in services inflation, moderating private sector pay growth, lower energy prices, and reassuring survey evidence mean the risk that high inflation will prove persistent is diminishing.”

And it flagged its belief that “even in the absence of the well-publicised issues in the US banking sector, the case for the Monetary Policy Committee to increase rates again in its March meeting had weakened.”

The Bank of England’s MPC is due to announce its latest decision on interest rates next Thursday. Rises at each of its last 10 meetings have taken UK base rates from a record low of 0.1% in December 2021 to 4%.

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Reuters noted yesterday that most economists it had polled this week believed the MPC would probably opt for an 11th straight rate hike next week.

However, observing mounting anxieties about the global banking sector, it observed interest-rate futures were yesterday putting a roughly 50% probability on base rates being held at 4% next Thursday. A week earlier, a pause was being given only a 10% chance.

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Troubles in the banking sector have included the collapse of US lender Silicon Valley Bank and a share-price plunge for Credit Suisse which prompted the Swiss central bank to inject emergency liquidity. Meanwhile, big US banks have injected funds into First Republic Bank.

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EY ITEM Club chief economic adviser Martin Beck declared, after more than a year of speculation about the size of the increase, “the focus has now moved to whether rates will rise at all”.

He said: “The EY ITEM Club thinks there’s a good chance they will not."

Mr Beck added: "Given the new uncertainties surrounding the outlook and more reassuring news on inflation, the EY ITEM Club thinks that the MPC will forgo the 25 basis points rise in Bank Rate in March which, until recently, had been widely expected. This would give time to both see how current financial uncertainties pan out and to absorb how other central banks respond.

"After this month, the MPC meets next in May. The MPC could proceed with a rate rise in May, but the EY ITEM Club thinks the peak has already been reached.”