From Morningstar: 2024-11-07 07:00:46

The Bank of England has cut interest rates by 0.25 percentage points to 4.75% due to slowing inflation, with the CPI dropping below target to 1.7% in September. The recent Budget has made rate-cutting more uncertain, with fiscal measures expected to impact CPI and GDP. Fixed-income markets are pricing in increased UK government spending as inflationary, affecting the Bank of England’s rate-cutting trajectory.

The recent rate cut marks the second in the UK loosening cycle, following the decision in August 2024. Other European central banks have also cut rates multiple times this year. The Bank’s move precedes the Federal Reserve’s expected rate cut of 0.25 percentage points. The Bank reiterated that rate cuts will be gradual to achieve the 2% inflation target.

The Bank of England meeting this week is a catch-up from the lack of a monetary policy meeting in October. Recent data shows a weaker-than-expected inflation reading for September, with CPI rising by 1.7% year on year. Inflation forecasts have increased due to the chancellor’s plans, with average CPI for 2025 now expected to be 2.6%. UK fiscal and monetary policy remain separate, but the government’s fiscal plans will impact the Bank of England’s decisions and forecasts.



Read more at Morningstar: Bank of England Cuts Interest Rates to 4.75%