Just in: Britain borrowed more than expected to balance the books last month.

Public sector net borrowing (excluding public sector banks) has come in at £8.4bn for February, higher than the £5.95bn which economists expected.

But it’s a drop of around £3.4bn compared to February 2023, when the deficit reached £11.8bn.

Increased tax receipts helped to push down the deficit.

The Office for National Statistics points out that this is the fourth month running when borrowing was lower than a year ago.

This leaves the national debt at £2.659 trillion, or around 97.1% of GDP.

Ruth Gregory, deputy chief UK economist at Capital Economics, says these borrowing figures are “disappointing”, but may not prevent tax cuts later this year.

February’s disappointing public finances figures suggest that the OBR’s new 2023/24 borrowing forecast published in March’s Budget already looks too optimistic. But this may not prevent the government from squeezing in another pre-election tax-cutting fiscal event later this year.

If not now, then when?

Many City analysts predict the Bank of England will start cutting rates by this summer, when inflation could have dropped all the way back to its 2% target.

Modupe Adegbembo, economist at Jefferies, explains:

We expect the MPC to keep rates on hold at 5.25% [today] and think the BoE is likely to begin cutting in August, though cuts could plausibly come earlier if wages fall back faster than anticipated.

Given the resilience of the economy, we think the BoE will cut rates steadily, penciling in 75bp of cuts across this year leaving Bank Rate at 4.50% by end-2024.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

It’s a busy day for central bankers, with the Bank of England expected to leave UK interest rates at a 16-year high at noon.

Despite inflation dropping to a two-and-a-half year low on Wednesday, economists predict BoE policymakers will choose to leave Bank Rate at its current level, 5.25%.

That would fail to bring any relief to UK borrowers, and maintain the pressure on the economy from higher borrowing costs.

According to the money markets this morning, ‘no change’ is a 95% while there’s just a 5% possibility of a quarter-point cut (lowering rates to 5%).

The Bank has been clear in recent weeks that it wants to see further evidence that inflationary pressures are falling’; economists will scrutinise the minutes of this week’s meeting for any hints as to how long policy should remain restrictive.

At last month’s meeting, the Bank’s nine policymakers split three ways – six voted to hold rate, two wanted a rise, and one a cut. That split could change today, as the monetary policy committee weighs up the risks of tightening for too long, versus easing too early.

The Bank will surely have appreciated yesterday’s drop in CPI inflation to 3.4%, neared to its 2% target. But it will also have noted that services inflation – a guide to domestic inflationary pressures – was 6.1%. That could be too high for comfort, for the BoE.

The MPC will also want to see signs that wage pressures are easing – as George Buckley, economist at Nomura, explains:

Annual rates of inflation are likely to fall further over the course of 2024, and pay settlements are running at a slower pace according to XpertHR data.

But calculations of price “momentum” suggest we’re not quite at the settling point we need to be for the annual rate of inflation to migrate all the way back to its target. The stronger services [inflation] print in particular provides some comfort for our view that the Bank will only cut rates from August this year, while weaker pay settlements raise the risk of an earlier move relative to our forecast.

Not cutting has its risks, though. Monetary policy operates with a lag – meaning interest rate changes are like turning the rudder on a supertanker, not the steering wheel of a racing car.

Last month, the Bank’s former chief economist, Andy Haldane, warned that keeping rates high could ‘crush the economy’

Haldane’s successor, Huw Pill, has likened the Bank’s challenge to a trip on Table Mountain. Rates may have reached their highest levels, but there’s more of a plateau to travel before they start falling….

The agenda

• 7am GMT: UK public finances

• 8am GMT: Taiwan’s interest rate decision

• 8.30am GMT: Switzerland’s interest rate decision

• 9am GMT: Norway’s interest rate decision

• 9am GMT: Eurozone ‘flash’ PMI survey of business activity for March

• 9.30am GMT: UK ‘flash’ PMI survey of business activity for March

• Noon GMT: Bank of England interest rate decision

• 12.30pm GMT: US weekly jobless figures