Economists predict no further rate cuts this year
The Bank of England is widely anticipated to maintain its current interest rate throughout the remainder of the year, as leading economists revise their forecasts in response to the government’s forthcoming budget and ongoing inflationary pressures.
Analysts from HSBC and Pantheon Macroeconomics have indicated that the Monetary Policy Committee (MPC) is likely to keep the base rate at 4% across its next four meetings.
Deutsche Bank economists have also updated their outlook, now expecting a single rate reduction in December rather than November, as the central bank evaluates the effects of the government’s fiscal measures on the economy and labour market.
Recently, Catherine Mann, a member of the MPC, stated her support for keeping the bank’s base rate unchanged for a “persistent” period, citing concerns over inflation. Mann has consistently opposed most of the rate cuts implemented by the central bank in the past year and voted against the latest 25 basis point reduction.
Since August last year, the Bank of England has lowered interest rates five times, a slower pace than the seven or eight cuts initially projected at the start of the rate-cutting cycle. The nine-member MPC remains divided, with differing views on the appropriate direction for monetary policy.
This week, lenders such as Barclays, Nationwide, and Virgin Money have increased rates on several mortgage products, according to Moneyfacts.
Chris Hare, senior economist at HSBC, expects the next quarter-point rate cut to occur in April 2026, noting that policymakers are dealing with “stickier inflation and stubbornly high inflation expectations, which are both more acute than in other western economies.”
“The MPC may have more upside surprises over the coming months, relative to its August forecast, strengthening the case to stay on hold,” Hare said, in a Times report.
The upcoming budget, scheduled for Nov. 26, is set to play a significant role in shaping the rate outlook. The budget will follow the MPC’s meeting on Nov. 6 and precede its final decision of the year on Dec. 18 by three weeks.
Sanjay Raja, senior economist at Deutsche Bank, said the bank would not cut the base rate until December as policymakers “wait for the details”, with the chancellor expected to address a £40 billion shortfall in public finances. The Treasury is reportedly considering measures such as stealth taxes, a mansion tax, and changes affecting pensioners.
Economists have also highlighted the continued rise in the UK’s inflation expectations, which reflect the outlook of households and businesses for the next five years. Rob Wood, economist at Pantheon, also attributed the recent increase in 30-year UK bond yields partly to concerns about persistent inflation.
“We think policymakers are over-egging the pudding when they say — as Andrew Bailey did at the recent Treasury Select Committee meeting — that market inflation expectations are well anchored to the target,” said Wood, who not expect the Bank of England to cut interest rates again until 2026.
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