Bank of England watchers are preparing for a critical interest rate decision next week, with economists highlighting uncertainty. Most experts expect the Bank of England to hold rates at 4% on Thursday, while others warn new economic data could push policymakers toward a cut.
The Monetary Policy Committee (MPC) will meet amid mixed signals from the economy. Official figures show UK Consumer Prices Index (CPI) inflation stayed at 3.8% in September, unchanged from July and August. Food prices eased slightly, but the reading remained below market expectations of 4%.
Edward Allenby, senior UK economist at Oxford Economics, noted that recent data may ease some MPC concerns about persistent inflation. He said, “Policymakers will likely want more sustained evidence that inflationary pressures are softening before committing to a cut.”
Meanwhile, Matt Swannell, chief economic adviser at the EY Item Club, highlighted encouraging signs, including falling energy costs. However, he cautioned that sticky inflation remains a concern. “Labour market loosening needed to reach the 2% inflation target could be slowing,” he added.
Economists also point out that the Bank of England may wait for Chancellor Rachel Reeves’ autumn Budget on November 26. Budget measures, including potential tax increases or spending cuts, could reduce demand and strengthen the case for a rate cut later this year. Ellie Henderson, economist at Investec, explained that fiscal tightening could ease inflationary pressures, making a November cut more likely.
Some analysts, however, already see signs pointing toward a reduction. Jack Meaning, chief UK economist at Barclays, said that slowing wage growth and the latest inflation figures could convince MPC members to lower rates to 3.75%. Goldman Sachs economists have also suggested the data may be enough to trigger a cut, reversing earlier expectations that rates would remain high until 2026.
The potential decision comes as millions of mortgage holders anticipate refinancing in the current interest rate environment. Any reduction could ease borrowing costs for households, but policymakers continue to weigh the risks of inflation and economic stability.
With Thursday’s announcement approaching, the Bank of England faces a delicate balancing act between supporting growth and controlling inflation, making this one of the closest-call rate decisions in recent years.
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