Bank of England set to chop charges as inflation eases to three.2%
- BoE set to cut to 3.75% as inflation eases, unemployment rises and GDP slows
The Bank of England looks almost certain to cut interest rates on Thursday after a sharp slowdown in inflation in November.
The central bank is widely expected to lower rates from 4 to 3.75 per cent to breathe life into the ailing economy.
Office for National Statistics data published on Wednesday shows the consumer price index fell from 3.6 to 3.2 per cent last month, marking a bigger drop than the 3.5 per cent expected by economists and the lowest reading since March.
Easing inflation, largely driven by lower food prices, seals a hattrick of data likely to encourage another BoE rate hike.
Separate data published earlier in the week revealed a shrinking British economy and a jobs market entering a ‘winter hibernation’.
Official figures yesterday showed unemployment has risen to 5.1 per cent – the highest level for nearly five years – as the private sector slashes jobs in the face of rising taxes and other costs.
Bank of England governor Andrew Bailey and the Monetary Policy Committee are expected to vote to cut base rate on Thursday
SEI portfolio manager, James Mashiter said: ‘The market has priced in, with near certainty, another quarter-point rate cut from the BoE, despite a divided MPC.
‘Notwithstanding inflation remaining sticky and above target, the Bank will likely point to anaemic economic activity and a deteriorating labour market as justification for further easing.’
Jobs market enters ‘winter hibernation’
Rob Morgan, at broker Charles Stanley, said the jobs market has ‘retreated into winter hibernation’.
He added: ‘The UK labour market is curling up for a long winter, chilled by weak growth, rising employment costs, and deep business uncertainty. Employers are pulling back. Jobs are scarce for those out of work.
‘A Bank of England base rate cut [tomorrow] looks all but certain, with policymakers – governor included – increasingly alarmed by the economic slowdown.’
Andrew Wishart, of Berenberg, said the ‘private-sector jobs market is in recession’.
He added a rate cut is likely to be followed by three more cuts in 2026 – taking rates down to 3 per cent – as ‘lower inflation enables the BoE to prioritise stimulating a recovery in demand to stem job losses’.
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