Add thelocalreport.in As A Trusted Source
Bank of EnglandThe decision will be taken in the next meeting of (BOE) interest rates It’s tomorrow (December 18), and all eyes will be on monetary policy committee (MPC) and whether its members choose to continue lowering rates.
base rate – Currently at 4.0 percent Three cuts this year impacting everything – businesses, consumers and taxpayers mortgage for loan and savingsSo what do experts expect this week and beyond?
Will interest rates be cut?
After a highly divisive vote in November, where analysts were divided on their expected outcomes and the MPC vote was ultimately 5-4 in favor of Hold, it’s a very different story this time.
Almost everyone expects the cut interest ratesBecause the BOE’s cautious approach meant they left it until after Rachel Reeves’s budget to decide on the next step.
Now that the Budget results have been absorbed and further data from November is in, everything points towards a cut in the base rate to 3.75 per cent.
Perhaps most importantly, this week’s inflation data is coming 3.2 percent less than expected This means the BoE can be confident that a rate cut is timely and necessary.
Emma Wall, chief investment strategist at Hargreaves Lansdown, says “a rate cut tomorrow is all but guaranteed, although markets should not expect the vote to be unanimous”, while Danny Hewson, head of financial analysis at AJ Bell, said “there are signs we have hit the elusive second peak in inflation” – which also points to a rate cut.
Barclays analyst Jack Meaning wrote in a research note that a cut was also expected, “albeit in a cautious tone.”
In other words, most analysts and economists are expecting another divided vote, with some of the more cautious members of the MPC wanting to remain while inflation is still well above the 2 percent target, but overall the cuts would win.
Get free fractional shares worth up to £100.
Capital at risk.
terms and Conditions apply.
Advertisement
Get free fractional shares worth up to £100.
Capital at risk.
terms and Conditions apply.
Advertisement
But interest rate decisions depend on a number of factors over the longer term, as well as expectations about what’s going to happen next – and this year has been difficult on both counts.
We face greater uncertainty in 2025 as a result of the domestic situation of prolonged high inflation, the imposition of Donald Trump’s tariffs, businesses dealing with higher labor costs, and increased geopolitical tensions. After Israel’s attack on Iran This caused some panic in oil prices.
With this it is worth remembering mortgage In particular, there are many products use price Future expectations of interest rates (swap rates), so changes in that market can be calculated in advance.
However, whether there is an immediate cut to variable rates or not, it is always worthwhile for savers to Checking the best offers in the market To make sure your money is earning as much as it can for you.
influencing factors
The MPC has nine members and their votes decide whether to cut, increase or keep the base rate the same.
Among the elements MPC members will be paying attention to are jobs and wages data, inflation levels across the UK and economic growth.
Each of them came out last week for November and, at face value, each says that cuts, cuts, cuts will result in: rising unemployment, falling inflation and no economic growth at all – in fact Britain’s GDP fell 0.1 per cent in the three months to October.
High inflation is one reason to keep interest rates up, because it can discourage businesses from investing in new projects or hiring – things that in turn increase earning and spending power. Conversely, fewer jobs and lower wages mean less spending power and less demand, which helps prevent further price increases.
Recent key data has shown that wage growth is slowing and unemployment has been rising over the year. These are the factors that could see a reduction in interest rates, while there are also external factors that could impact the UK which are the government and Bank of England But there may be little or no control.
What will happen in 2026?
The further we look into the future, the bleaker the picture will be – much will depend on how the economy responds to the November Budget.
Barclays is still expecting the next cut in March rather than February unless economic conditions improve significantly.
“There are still massive question marks over what 2026 will bring and the market does not expect the Bank of England to cut interest rates more than once or twice next year, so borrowers hoping to see a return to the ultra-low levels many have become accustomed to will have to adapt,” said Ms Hewson of AJ Bell.
But the Trades Union Congress wants the BOE to go much further, saying it “has been very cautious this year, and inflation is already lower than expected last month. So this week’s interest rate cut should be the beginning of a sequence of cuts in the coming months. It is long overdue and the economy needs it.”
The next voting dates of MPC will be on February 5, March 19 and April 30.