UK rate-setters couldn’t have been more closely divided Thursday when they decided to leave their benchmark interest rate unchanged, with comments from monetary policymakers prompting analysts to suggest lower rates could come just in time for Christmas.
The Bank of England’s Monetary Policy Committee (MPC) voted 5-4 to keep the bank rate at 4.00%, with dissenters Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor calling for a quarter-point cut. Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill all cast ballots for a hold – BoE Governor Andrew Bailey did the same to break the tie.
UK Inflation looks to have peaked at 3.8%, the rate from July through September, according to the bank. So, as long as consumer prices are on the downslope, “the bank rate is likely to continue on a gradual downward path,” Bailey told journalists at the press conference following the rate decision.
“Gradual” is the key word here. The bank’s boss warned that he needs to see additional evidence – or “more than one number” – that inflation is slowing.
Even Ramsden, who voted for a cut, noted that the most recent gauge of consumer price growth in July, August, and September was an issue: “Three-point eight percent is quite a way above two,” the BoE target for inflation.
Following the rate hold, the interest rate swap market gauged the chance of a cut at the bank’s December meeting at more than 65%, so not a lock my any means.
“If you take one thing away from the Bank of England’s decision to keep rates on hold this month, it’s that the prospect of a December rate cut hinges on Governor Andrew Bailey – and him alone,” ING said in a note. “Barring any major upsets in the two inflation releases between now and December’s meeting – and assuming no surprises in the Autumn Budget – then it sounds like Bailey will vote for a cut.”
The numbers have to be right for a cut next month, according to Matt Swannell, chief economic advisor to the EY ITEM Club. “Today’s decision clearly opens the door to a December cut, but that remains contingent on the incoming data.”
Thursday’s hold and the bank’s comments had TD Securities adjusting accordingly, saying it was shifting its anticipated November cut to December and move its February 2026 cut to March to maintain the quarterly pace after this month's pause until the BoE reaches a terminal rate of 3.50%.”
The latest BoE forecasts (outside brackets) were generally good for those hoping for rate cuts. (Source: BoE)
Staff forecasts point to lower rates
The BoE’s inflation outlook has improved somewhat for households and those pining for a reduction in borrowing costs. The latest projections showed inflation at 3.5% this quarter, down from the August estimate of 3.6%. Forecasts for Q4 2026 and ’27 were unchanged at 2.5% and 2% respectively, with price growth expected to increase to 2.1% in Q4 2027.
UK economic growth was expected at 1.4% this quarter, a forecast down a tenth from the August estimate. However, projections for GDP expansion in the coming fourth quarters were raised a tenth to 1.4% next year and 1.7% in 2027, with growth of 1.8% predicted for the final three months of 2028.
The outlook for unemployment was less rosy: It was forecast a touch higher in the final three months of this year and the following two.
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- Four officials vote for cut
- Forecasts fall for CPI, rise for GDP
- Analysts say reduction possible in December
By Eric Culp, European Editor
LiveSquawk News
@eculp.bsky.social
@EricCulpLS
6 November | 14:45 GMT
UK rate-setters couldn’t have been more closely divided Thursday when they decided to leave their benchmark interest rate unchanged, with comments from monetary policymakers prompting analysts to suggest lower rates could come just in time for Christmas.
The Bank of England’s Monetary Policy Committee (MPC) voted 5-4 to keep the bank rate at 4.00%, with dissenters Sarah Breeden, Swati Dhingra, Dave Ramsden and Alan Taylor calling for a quarter-point cut. Megan Greene, Clare Lombardelli, Catherine L Mann and Huw Pill all cast ballots for a hold – BoE Governor Andrew Bailey did the same to break the tie.
UK Inflation looks to have peaked at 3.8%, the rate from July through September, according to the bank. So, as long as consumer prices are on the downslope, “the bank rate is likely to continue on a gradual downward path,” Bailey told journalists at the press conference following the rate decision.
“Gradual” is the key word here. The bank’s boss warned that he needs to see additional evidence – or “more than one number” – that inflation is slowing.
Even Ramsden, who voted for a cut, noted that the most recent gauge of consumer price growth in July, August, and September was an issue: “Three-point eight percent is quite a way above two,” the BoE target for inflation.
Following the rate hold, the interest rate swap market gauged the chance of a cut at the bank’s December meeting at more than 65%, so not a lock my any means.
“If you take one thing away from the Bank of England’s decision to keep rates on hold this month, it’s that the prospect of a December rate cut hinges on Governor Andrew Bailey – and him alone,” ING said in a note. “Barring any major upsets in the two inflation releases between now and December’s meeting – and assuming no surprises in the Autumn Budget – then it sounds like Bailey will vote for a cut.”
The numbers have to be right for a cut next month, according to Matt Swannell, chief economic advisor to the EY ITEM Club. “Today’s decision clearly opens the door to a December cut, but that remains contingent on the incoming data.”
Thursday’s hold and the bank’s comments had TD Securities adjusting accordingly, saying it was shifting its anticipated November cut to December and move its February 2026 cut to March to maintain the quarterly pace after this month's pause until the BoE reaches a terminal rate of 3.50%.”
Staff forecasts point to lower rates
The BoE’s inflation outlook has improved somewhat for households and those pining for a reduction in borrowing costs. The latest projections showed inflation at 3.5% this quarter, down from the August estimate of 3.6%. Forecasts for Q4 2026 and ’27 were unchanged at 2.5% and 2% respectively, with price growth expected to increase to 2.1% in Q4 2027.
UK economic growth was expected at 1.4% this quarter, a forecast down a tenth from the August estimate. However, projections for GDP expansion in the coming fourth quarters were raised a tenth to 1.4% next year and 1.7% in 2027, with growth of 1.8% predicted for the final three months of 2028.
The outlook for unemployment was less rosy: It was forecast a touch higher in the final three months of this year and the following two.
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