Bank of England - ... and cut!

We expect the Bank of England to cut the Bank Rate by 25 basis points to 3.75% at its December meeting, as inflation continues to surprise on the downside and labour market weakness, combined with slowing wage growth, eases concerns about persistent price pressures. The Autumn Budget adds a modest disinflationary impulse and was well received by markets, though its short-term focus on political survival leaves deeper macro-fiscal challenges unresolved. Looking ahead, we forecast a terminal rate of 3.25% in 2026, with risks tilted to the downside if economic slack intensifies. Fiscal and political uncertainty could complicate the central bank’s policy outlook later in the year.