United Kingdom: Central Bank leaves rates unchanged in December
Latest bank decision: At its meeting on 19 December, the Central Bank decided to maintain the Bank Rate at 4.75% with a majority vote of 6-3, where three members preferred a reduction by 0.25% points to 4.50%.
Monetary policy drivers: The decision to pause the easing cycle initiated earlier in 2024 was driven by upticks in headline inflation, core inflation and wage growth since September, as well as by a desire to assess the impact of past rate cuts.
Rate cuts to resume ahead: The Central Bank suggested that further monetary easing would be gradual in order to keep inflation in check; our Consensus is for slightly over 100 basis points of rate cuts in 2025.
Panelist insight: On the outlook, Nomura analysts said:
“We expect the next cut to be in February, with the voting pattern allaying some fears that the Bank may side-step the meeting. Still, next month’s November wage print and December’s services inflation reading could yet dictate the Bank’s response. We continue to look for 100bp of cuts in 2025.”
ING’s James Smith was even more dovish:
“The apparent growing dovish front within the MPC in spite of the latest hawkish wage data potentially suggests a greater focus on slowing activity. That reinforces our dovish view on the Bank of England for next year – we expect 150bp of cuts.”