Expectations Indicate Bank of England's Move to Keep Interest Rates Unchanged Ahead of Budget Announcement

SadaNews - It is expected that the Bank of England will keep interest rates unchanged on Thursday, slowing the pace of monetary easing that it has maintained for over a year at a quarter-point every 3 months.

Investors and economists expect that the bank's Monetary Policy Committee will keep the interest rate at 4%, as inflation in the UK continues at around double the target of 2%, and with the autumn budget approaching on November 26.

A vote to keep borrowing costs unchanged would end the pattern the bank has followed since August 2024, of lowering interest rates every two meetings, in contrast to the US Federal Reserve, which cut interest rates again on Wednesday.

Expectations for Rate Cut in December

Keeping interest rates unchanged may be short-lived, as traders have increased their bets on a cut in December following weaker-than-expected data on inflation, jobs, and production.

Although markets see a low probability of a rate cut this week, the chances of a cut on December 18 have risen to about 60%.

Governor Andrew Bailey warned that the timing of the next cut is uncertain, especially since Thursday’s meeting comes just three weeks before Chancellor Rachel Reeves presents the anticipated budget.

Taxes Under Scrutiny

Reeves has faced criticism for causing an increase in food prices after raising employer payroll taxes last April. However, a new round of large tax increases, possibly targeting households this time, could lead to further slowdown in an already weak economy.

Opinion of Bloomberg Economics Experts:

"The arrival of several weaker-than-expected data in recent weeks has increased uncertainty about the outcome of the Bank of England's meeting this week. While a rate cut is possible, with rates approaching neutral and inflation still around double the bank's target, we see keeping rates unchanged as more likely."

"The central bank also wants to know the outlines of the budget before taking further easing steps. We remain convinced that rates will not be cut again until the Bank of England sees a clear trend of declining inflation, which could happen by April. However, risks lean towards an early cut, perhaps in February or even December."

- Dan Hanson and Ana Andrade, Economic Analysts at Bloomberg Economics.

Global Trend

Central banks in Australia, Sweden, and Brazil are also expected to keep interest rates unchanged, while the Mexican central bank may consider cutting them.

In the United States, the federal government shutdown may continue to disrupt the release of economic data.