The Bank of England reduced interest rates by 25 basis points, bringing the rate to 4.75% as part of its second cut this year, initiated in August’s easing cycle. Analysts expect the central bank to pause further cuts in December after the Labour government’s tax-and-spend budget potentially boosts growth and inflation. JP Morgan’s Allan Monks predicts the rate will stay above 4% through 2025, with a gradual approach to policy easing. Meanwhile, the U.S. Federal Reserve prepared to cut rates by 25 basis points, following a 50 basis point reduction in September.
In Sweden, the Riksbank decreased rates by 50 basis points, signaling more reductions could follow, bringing its rate to 2.75%. Ahead of these rate decisions, UK bond yields slightly declined after rising due to concerns over increased borrowing and taxes in the recent budget.
Despite expected rate cuts, the British pound appreciated against the dollar and euro. UK inflation fell sharply to 1.7% in September, heightening expectations for November cuts, though the energy price cap could push inflation slightly higher. Mortgage borrowers face potential rate hikes amid the fiscal plans, with lenders like Virgin Money increasing rates and others like Santander reducing them. The average five-year fixed mortgage rate now stands at 4.64%, highlighting uncertainty in the mortgage market.
UBS suggests Trump’s election could accelerate 2025 rate cuts in the UK, citing potential disinflation from loss of consumer and corporate confidence linked to his proposed tariffs. Analysts expect the ECB to cut rates to 2% by mid-2025, with similar pressures impacting the Bank of England’s policy later that year.
Original Story https://www.cnbc.com/2024/11/07/live-updates-bank-of-england-interest-rate-decision-november.html
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