Bank of England Keeps the Rate Roller Coaster Going
Like a seasoned DJ at a crowded club, the Bank of England dropped a 25‑basis‑point (bp) cut during lunchtime—its second cut in this round—and now the Bank Rate sits at 4.75%.
From a Narrow Vote to a Solid Majority
Back in August, the decision to slash rates was a knife‑edge dance, with the Monetary Policy Committee (MPC) split 4-4-1. This time, the mood flipped: out of nine MPC members, eight voted for the cut, leaving only External Member Mann to stay on the “hold” side.
- The core trio—Governor, Deputies, and Chief Economist—now all agree on the policy’s direction.
- 4.75% is the result of a strategic “step‑by‑step” approach.
Keeping a “Restrictive” Stance for the Time Being
The MPC reaffirmed that they’ll tackle each meeting on its own merits, nudging policy toward a gradual loosening while ensuring inflation doesn’t binge. It’s a delicate balancing act: enough room for growth but not so much that the price tags skyrocket.
Inflation Forecast—What’s on the Horizon?
The forecast saw inflation nudged higher after last week’s expansionary budget and a more dovish market‑implied rate path.
- Headline CPI is projected at 2.2% in the fourth quarter of 2026.
- It then dips to 1.8% in 2027.
These numbers tell financial markets that the BoE has already priced in a fair bit of easing—demanding a bite back from the economy.
What’s Next? When’s the Next Drop?
Expect the cut’s last for the year. The MPC will keep an eye on incoming data, especially the lingering price pressures. The next 25bp drop might come in February, 2025—once policymakers feel confident the inflation path is firmly on course.
- Quarterly cuts remain the baseline.
- If disinflation holds, the pace could speed up early in 2025.
Why the GBP Might Not Be Swung, Despite Tightening Difference
While the BoE’s stance is more hawkish compared to the U.S. Fed or the ECB, this itself won’t be enough to boost the pound. The FX market is focused on relative growth. With the UK’s sluggish prospects, the pound struggles against its peers—especially as the U.S. continues to shine, a trend likely to persist into the next Trump Administration.
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