The Bank of England is readying to cut interest rates to the lowest level in nearly three years, delivering a bout of “festive news” to borrowers, economists think.
The Bank’s Monetary Policy Committee (MPC) is widely expected to reduce interest rates from 4% to 3.75% on Thursday.
This would bring borrowing costs down to the lowest rate since the beginning of February 2023.
READ MORE: {}
The next decision from policymakers, which will be the last of the year, comes as economic data shows signs of cooling inflation in the 海角视频.
Consumer Prices Index (CPI) inflation fell to a four-month low of 3.6% in October after gas and electricity prices rose at a slower rate to the previous year.
Economists think that falling inflation, alongside other signs that the economy is cooling, will encourage policymakers to opt for a rate cut next week.
Laith Khalaf, head of investment analysis at AJ Bell, said a rate cut would be “festive news for borrowers of all stripes”.
He added: “The Bank of England will be focused on hitting the 2% inflation target here in the 海角视频, and for the time being that means loosening policy.
Most Read
“But we shouldn’t expect a cascade of rate cuts next year.
“Previous monetary easing will still be working through the system and greasing the wheels, but fresh stimulus could be in short supply throughout 2026.”
The next decision also follows last month’s autumn Budget, which some economists said was less likely to soothe inflation than they had expected.
There had been speculation prior to the Budget that the Government might choose to raise income tax rates, which may have put downward pressure on inflation – but that did not happen.
Philip Shaw, an economist for Investec, said the tax measures announced by Chancellor Rachel Reeves “do not begin to bite until 2028-29 and therefore are of relatively little significance in the current interest rate debate”.
“That said, we would note that the overall fiscal stance is relevant thanks to previous Budget measures weighing on the economy, notably the continued freeze in income tax thresholds,” he said.
Andrew Goodwin, chief 海角视频 economist for Oxford Economics, said: “A rate cut is likely, though it is a closer call than markets think it is.
Don’t miss
“The committee is deeply divided and four out of nine officials are unlikely to vote for the cut.
He said the vote will “hinge solely” on the Bank’s Governor, Andrew Bailey, who has indicated he thinks the inflation outlook is improving.
The US Federal Reserve voted to cut interest rates this week to the lowest level since 202, but its chair Jerome Powell said the central bank would be carefully assessing economic data over the months ahead.