Tomorrow’s interest rate decision will be a close call by the looks of it, with market watchers split over whether the Monetary Policy Committee will hold firm or signal the next stage of policy easing, and go for a cut from the current base rate of 4%.
Recent data has painted a more nuanced picture of the UK economy: inflation cooled to 3.8% in September—still nearly double the Bank’s 2% target but trending lower, whilst wage growth and employment data point to a softening labour market. Against this backdrop, and with fiscal tightening expected in the upcoming Autumn Budget, markets are pricing in the possibility of a second rate cut before year-end, but it’s clear that no-one is holding their breath especially with so much uncertainty ahead of 26th November.
Experts from across the industry have been sharing their thoughts about what the MPC decision might be tomorrow as follows:
Grant Slade, UK Economist at Morningstar, has released new UK economic forecasts ahead of tomorrow’s BOE rate decision, revealing the UK should see economic resilience in 2026, despite fiscal tightening looming in the autumn budget commenting: “We expect the BoE to hold the Bank Rate steady at 4%. Still, we think the decision will prove a closer call for the Monetary Policy Committee, than it was during the bank’s September meeting. Then, the majority of Monetary Policy Committee members felt that risks to a further uptick in the inflation rate outweighed the risk of demand weakening in the face of still high interest rates.
“However, recently released labour market data points to a shift in the balance of these risks. Indeed, a further uptick in the unemployment rate and weakening payrolled employee data point to a labour market which continues to soften. At the same time, fiscal policy measures are expected to become increasingly contractionary. Government spending is set to slow in the new year, while tax rises are widely anticipated in the upcoming Autumn Budget later this month.
“For these reasons, we see scope for further monetary easing. However, we anticipate that the Monetary Policy Committee will maintain its current stance this month as it awaits further details from the Autumn Budget and additional economic data to confirm that enough slack exists to exert downward pressure on inflation. Therefore, we expect the BoE to deliver one final 25 basis point interest rate reduction for the year at its December 2025 meeting.”
Commenting ahead of the upcoming Bank of England interest rate decision tomorrow, Charlie Ambler, Co-Chief Investment Officer, Partner at wealth management firm Saltus, said: “With the latest inflation data sparking cautious optimism among investors, markets have responded by pricing in a second rate cut this year. While inflation appears to have peaked at 3.8%, not easing in the way that markets and households would like, services inflation is running below expectations and private sector wage growth is cooling.
“Regardless of whether rates are cut on Thursday, however, any forward guidance will likely remain cautious ahead of the Autumn Budget. The Chancellor is expected to announce a wave of tax hikes that could harm economic growth and subsequently provide grounds for a rate cut in December. In the interim, the Bank must uphold its duty to provide certainty and avoid deviating from its slow and steady cutting cycle.
“Investors should be prepared for a more selective market environment, with quality, resilience and income-generation remaining key themes in portfolio construction. While a rate cut to 3.75% may disincentivise saving and entice investors to take advantage of opportunities in interest rate sensitive sectors and UK equities, investors should remain focused on long-term returns.”
Jeff Brummette, Chief Investment Officer at independent investment manager Oakglen Wealth, said:
“It is widely expected that the Bank of England will leave interest rates unchanged this month, with September’s inflation data of 3.8% still well above target. If the bank were to surprise with a rate cut, it would almost certainly be contingent on a slowing labour market and expectations that the upcoming budget will help dampen inflation”
Peter Goves, Head of Developed Market Debt Sovereign Research of MFS Investment Management, said:
“We expect the BoE to hold this week but at the same time it will have to acknowledge an array of dovish data that has come out recently. This includes weaker private sector pay growth, weaker activity data and a downward surprise in September’s CPI. The hold is perhaps more likely than not because levels in the data remain somewhat high (spot CPI, actual wage growth) even if the trend looks to remain favourable. We are also mindful off some members’ focus on inflation expectations and the need to monitor pay growth dynamics which are also viewed within the context of the Agents’ Survey which won’t be available for this meeting. Overall however, more cuts are likely coming which keeps us constructive on the front end here for now.”
