The Bank of England faces a finely balanced decision today as it prepares to announce its latest move on interest rates at noon, with markets divided over whether policymakers will hold or deliver another cut.
The base rate currently stands at 4%, and while most analysts expect the Monetary Policy Committee (MPC) to keep rates unchanged, money markets late on Wednesday were pricing in roughly a one-in-three chance of a 25 basis-point cut to 3.75%.
Such a move would mark the sixth rate reduction since August 2024, as the Bank gradually unwinds its restrictive stance following a sharp rise in borrowing costs aimed at taming inflation.
It remains a difficult call for policymakers. UK inflation slowed to 3.8% in September, lower than expected, suggesting that cost-of-living pressures may be easing. However, officials remain wary of cutting too aggressively before price growth returns closer to the Bank’s 2% target.
Adding to the uncertainty, Chancellor Rachel Reeves this week signalled the possibility of tax rises in her pre-budget speech — a move that would likely prove disinflationary but could also weigh on growth.
Markets and businesses will be watching closely at noon for both the decision and accompanying statement, which may offer clues about the pace of future policy easing.
