The Bank of England could cut interest rates to the lowest level in three years on Thursday from 4% to 3.75%, economists believe.
The Bank’s Monetary Policy Committee (MPC) could lower the base rate which would be “festive news for borrowers of all stripes.”
Laith Khalaf, head of investment analysis at AJ Bell, said, “The Bank of England will be focused on hitting the 2% inflation target here in the UK, and for the time being that means loosening policy.
“But we shouldn’t expect a cascade of rate cuts next year.
“Previous monetary easing will still be working through the system and greasing the wheels, but fresh stimulus could be in short supply throughout 2026.”
Philip Shaw, an economist for Investec, said the tax measures delivered by Rachel Reeves “do not begin to bite until 2028-29 and therefore are of relatively little significance in the current interest rate debate”.
“That said, we would note that the overall fiscal stance is relevant thanks to previous Budget measures weighing on the economy, notably the continued freeze in income tax thresholds,” he said.
Andrew Goodwin, chief UK economist for Oxford Economics, said, “A rate cut is likely, though it is a closer call than markets think it is.
“The committee is deeply divided and four out of nine officials are unlikely to vote for the cut.”
