Bank of England Expected to Cut Interest Rates Amid Slowing Inflation and Economic Concerns
The Bank of England is expected to cut the Bank Rate from 4.00% to 3.75% at noon, marking the lowest interest rate since January 2023. Markets currently price a 97.5% chance of a 25 basis point cut, with only a 2.5% chance that the rate will remain at 4%.
Recent data shows inflation slowed to 3.2% last week, easing price pressures and supporting the case for a rate cut. Additionally, unemployment has risen to a five-year high and wage growth has slowed, both factors that argue for easier monetary policy. Economic growth concerns are further reinforced by October GDP figures indicating the economy is shrinking.
The Monetary Policy Committee (MPC) is currently divided on the decision, with a potential 5-4 vote in favor of the cut. Governor Andrew Bailey is viewed as the swing vote and is possibly leaning towards a cut, according to ING's James Smith.
A cut today would lower borrowing costs and may foreshadow additional cuts in 2026 depending on future price pressures and labor market data.
The day's calendar also includes monetary decisions from Sweden and Norway in the morning, followed by the Bank of England decision at 12:00, the European Central Bank decision at 1:15, US inflation figures at 1:30, and the ECB press conference at 1:45, providing important context for market participants.
