The Bank of England is widely expected to cut interest rates in December, following today’s narrow 5–4 decision to keep borrowing costs on hold at 4%, with Governor Andrew Bailey casting the deciding vote.
Money markets now imply a 69% probability that the Monetary Policy Committee (MPC) will lower rates to 3.75% at its next meeting, as policymakers edge closer to resuming the easing cycle paused this month.
Kallum Pickering, chief economist at Peel Hunt, said the split decision makes a rate cut in December increasingly likely:
“In all likelihood, this sets the Bank of England up for a cut in December as long as inflation continues to decline and the Government does not announce any inflationary tax or spending measures at the 26 November Budget.”
Andrew Wishart, senior UK economist at Berenberg, said the close vote indicated that the hold decision was “a pause in the cutting cycle rather than the end of it.”
“It is only a matter of time before the Bank of England reduces interest rates again,” he said, though he added that he expects another hold in December before a cut in February.
The next few weeks will bring crucial data on inflation, wage growth, and retail spending, which could determine whether the MPC has sufficient confidence to begin loosening monetary policy before year-end.
