The Bank of England is expected to make a landmark decision this Thursday, with economists predicting it will cut the base rate to 4% – the lowest level since March 2023. This anticipated move would mark the fifth reduction since rates peaked at 5.25% in August last year.
Why the Rate Cut is Expected
Financial experts cite several key factors driving this decision:
Falling Inflation: With CPI inflation currently at 3.6% and projected to decline further, the Monetary Policy Committee (MPC) appears confident in easing monetary policy. As reported by BBC Business, inflation is expected to approach the Bank’s 2% target by year-end.
Weakening Labor Market: July’s unemployment rate rose to 4.7%, its highest since 2021. Pantheon Macroeconomics notes this “loosening” labor market reduces inflationary pressures, giving the MPC room to act.
Dovish Shift: Analysis from Financial Times suggests growing support among MPC members for more aggressive rate cuts, with some potentially advocating for a 0.5% reduction.
What This Means for Consumers
Mortgage Holders
Tracker mortgages will see immediate reductions
Standard variable rates will follow suit
Fixed rates may decline if markets anticipate further cuts, though swap rates remain volatile
As noted by MoneySavingExpert, borrowers should compare deals carefully as lenders may not pass on full reductions.
