UK Construction Slump Strengthens Case for Interest Rate Cut
A sharp decline in UK construction activity last month has added further weight to expectations that the Bank of England will cut interest rates at its meeting tomorrow at noon.
Markets are now pricing in a 95% probability of a 0.25 percentage point cut, bringing the base rate down from 4.25% to 4%, according to City trading this morning.
Andy Burgess, fixed income investment specialist at Insight Investment, commented:
“The Bank of England is widely expected to cut rates this week in what is likely to be a complex decision, as the MPC weighs weak economic growth, persistent inflation, and an approaching period of fiscal tightening.”
While a 0.25% cut is the consensus view, the focus will be on the voting breakdown — particularly whether any Monetary Policy Committee members push for a larger 0.5% reduction or prefer to keep rates steady.
Burgess also noted that the Bank faces a narrow window of opportunity to ease rates ahead of the government’s autumn budget.
