Bank of England Plans to Slash Interest Rates Yet Again
- Interest rates in the UK are likely to drop to 4.75%, following a previous reduction to 5% in August.
- This decision comes amid a significant decline in the UK's Consumer Prices Index inflation, which fell to 1.7% in September.
- Economists predict that this cut may not lead to a series of rapid rate cuts due to uncertainties related to economic policies and inflation forecasts.
On November 7, 2024, the Bank of England is anticipated to announce a reduction in interest rates to 4.75%. This follows a previous cut in August and comes amid a backdrop of declining inflation, which has fallen to 1.7% in September. The decrease in inflation was primarily driven by lower petrol prices and reduced airfares. Predicted economic trends indicate that the recent government budget, which entails a significant increase in spending financed by tax hikes, may lead to higher inflation in the future. Despite the expected interest rate cut, economists have tempered their forecasts for rapid subsequent reductions, originally anticipated through the upcoming year. Experts indicate that uncertainty surrounding the economic policies of newly elected US President Donald Trump, particularly his proposed tax cuts and increased tariffs, could have implications for the UK monetary policy, potentially leading to prolonged higher interest rates. The Bank of England's Monetary Policy Committee faces internal divisions, with certain members favoring a cautious approach in light of ongoing inflation concerns in the services sector and wage growth. Their meeting takes place shortly after significant fiscal announcements by Chancellor Rachel Reeves, which included spending commitments projected to stimulate economic expansion despite concerns over inflation. The outcome of this meeting is seen as pivotal in determining the economic landscape ahead. It is crucial to monitor upcoming inflation reports before the end of the year as they may influence future decisions regarding interest rates.