The Bank of England is preparing for a finely poised vote on interest rates next Thursday, as policymakers weigh the benefits of lower inflation against the threat of weaker economic growth following upcoming tax rises.
Markets, which only weeks ago expected no change in rates until mid-2025, have now sharply shifted expectations. Investors are betting that the Monetary Policy Committee (MPC) — the Bank’s nine-member rate-setting panel — could vote narrowly in favour of a 0.25 percentage point cut, reducing the base rate to 3.75 per cent, the lowest level in nearly three years.
If approved, it would mark the Bank’s sixth cut since August 2024 and would mirror the US Federal Reserve’s recent decision to ease policy for the second consecutive meeting.
The possibility of an imminent rate reduction follows a run of softer economic data. Inflation, while still above target at 3.8 per cent, has remained below the Bank’s forecasts for three consecutive months. Services inflation — a key indicator of domestic pricing pressures — eased to 4.7 per cent in September, under the MPC’s 5 per cent forecast.
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