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The Bank of England is set to maintain its interest rates at 4% in anticipation of Chancellor Rachel Reeves’ upcoming Budget. While there are some suggestions that the latest inflation data could support a rate cut, experts believe that such a move is more likely to happen in December. Bank Governor Andrew Bailey previously hinted at further rate cuts, but the pace of these cuts remains uncertain.
The Bank’s base rate plays a crucial role in influencing borrowing costs for individuals and businesses, as well as impacting savings returns. The Monetary Policy Committee (MPC) will convene to announce its decision at 12:00 GMT, with most analysts expecting the rates to remain unchanged. Over the past year, the Bank has been reducing its benchmark interest rate by 0.25 percentage points every three months, but this pattern is likely to be disrupted this time.
Analysts are closely monitoring economic indicators such as rising prices, employment, and wages to inform the MPC’s decision on interest rates. Despite inflation reaching 3.8% in September – well beyond the Bank’s 2% target – the rate was lower than anticipated. Some analysts, including those at Barclays and Goldman Sachs, predict a rate cut to 3.75% this month due to a decrease in food and drink prices. The upcoming Budget delivery on 26 November by Chancellor Rachel Reeves could further impact the case for a December rate cut if it includes substantial tax hikes without fueling inflation.
Observers are keen to see how the Budget and subsequent economic data releases will shape the Bank’s stance on interest rates. Lenders have been adjusting their interest rates on new fixed deals to attract customers and prepare for potential central bank rate adjustments in the future. However, savers may face diminished returns if the Bank decides to cut rates in the near future. Overall, the uncertainty in the economic landscape calls for a balance between stimulating economic growth and ensuring financial stability
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