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Bank of England Expected to Cut Rates to 3.75% Next Week After Second GDP Decline

Upcoming unemployment and inflation reports could sway a closely split MPC.

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A cut to the base rate is generally good for mortgage holders, but it can be bad news for savers (the_burtons/Getty Images)

Overview

  • Official data show GDP fell 0.1% in October after a 0.1% drop in September, heightening recession worries.
  • Markets and many economists are pricing a 25bp reduction to Bank Rate at Thursday’s decision, taking it to 3.75%.
  • The vote is seen as tight, with Governor Andrew Bailey viewed as a potential swing voter and some policymakers urging caution on inflation risks.
  • CPI stood at 3.6% in the year to October, still above the 2% target, with new readings on jobs, wages and prices due early next week.
  • Lenders have already cut some fixed mortgage offers, while advisers urge savers to lock in top cash ISA and fixed rates near 4.3%–5% as Budget-related uncertainty weighs on investment.