United Kingdom: Central Bank decreases rates in November
Latest bank decision: At its meeting ending on 6 November, the Monetary Policy Committee (MPC) voted by a large majority to reduce the Bank Rate by 0.25% points to 4.75%, with one member preferring to maintain the Bank Rate at 5.00%. This took rate cuts so far this year to 50 basis points.
Monetary policy drivers: The key domestic factors influencing the Central Bank’s decision were disinflation, softening wage growth and a loosening labor market. Regarding inflation, it was below the Central Bank’s 2.0% target in September, though the Bank judged it would rise about target in Q4 due to a more challenging base of comparison.
Policy outlook: The Central Bank stated that it would take a gradual approach to monetary easing going forward. Our Consensus is for over 100 basis points of further rate cuts by end-2025, with a forecast spread of 175 basis points.
Panelist insight: On the outlook, ING’s James Smith said:
“A December rate cut, we think, now looks unlikely. Previously we’d thought that the Bank would accelerate its cutting cycle beyond today, but uncertainty surrounding the budget’s impact has changed our mind on that. […] Our view is that rate cuts will be cut at every meeting from February until rates reach 3.25% next autumn.”