A new survey of economists suggests that the Bank of England is likely to reduce interest rates in December, followed by another cut early next year. This marks a shift from expectations only a month ago, when many analysts believed rates would remain unchanged for the rest of 2025.
The December decision will come shortly after the Chancellor, Rachel Reeves, delivers the Autumn Budget on 26 November. While she is no longer expected to increase income tax, the Treasury is likely to pursue smaller adjustments elsewhere to address revenue gaps.
Earlier this month, the Monetary Policy Committee voted narrowly, by five votes to four, to maintain the current rate. Governor Andrew Bailey cast the deciding vote, indicating a preference to wait for clearer evidence that inflation is continuing to fall before supporting a cut.
According to a Reuters poll conducted between 13 and 18 November, nearly 80 percent of economists surveyed expect a 25 basis point reduction at the Bank’s 18 December meeting, bringing the Bank Rate to 3.75 percent. The remainder predict no change. A similar proportion now foresee a further reduction to 3.50 percent during the first quarter of 2026.
Gabriella Willis, UK economist at Santander CIB, said that a cut in December appears the most likely outcome unless upcoming inflation data is significantly stronger than expected. She added that Governor Bailey will probably remain the pivotal vote, with the October and November inflation figures and signs of a slowing labour market acting as key factors.
Markets appear to agree. Interest rate futures have already priced in a December reduction. Inflation has held at 3.8 percent since July, well above the Bank’s 2 percent target, but upcoming data is expected to show a slight easing to 3.6 percent in October. Median forecasts anticipate further declines, with inflation averaging 3.0 percent and 2.5 percent in the next two quarters.
Economic growth is projected to reach 1.4 percent this year and slow to 1.1 percent in 2026, according to the poll. Willis noted that while the Autumn Budget is still expected to have a disinflationary effect, its impact may be less pronounced than previously thought due to more modest policy changes.
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