Analysts Split as Weak Economic Data and Looming UK Budget Stir Policy Uncertainty…
The Bank of England (BoE) is widely expected to keep its key interest rate steady when it meets on Thursday, though some analysts warn that a surprise rate cut could still be in play as the UK economy shows fresh signs of strain.
Most market watchers anticipate the central bank will maintain its main borrowing rate at 4.0 percent, with inflation still running above its 2.0 percent target. However, a recent wave of disappointing economic indicators has reignited speculation about a possible pre-budget policy shift.
“A spate of weak economic data… means a surprise cut cannot be ruled out,” said Kathleen Brooks, Research Director at XTB Trading Group.
Attention will also focus on the BoE’s updated projections for inflation and economic growth, coming less than a month before Prime Minister Keir Starmer’s Labour government unveils its first full budget.
A rate cut, if it happens, could offer much-needed relief for the administration after Chancellor of the Exchequer Rachel Reeves signaled on Tuesday that tax increases may be unavoidable in the November 26 budget.
Reeves described her forthcoming fiscal plan as a series of “necessary choices,” stressing that the government must balance high public debt with efforts to protect households from rising costs and interest rates.
“As I take my decisions on both tax and spend, I will do what is necessary to protect families from high inflation and interest rates,” Reeves said in a televised address outside Downing Street.
A potential BoE rate cut would likely feed through to retail banks, easing the burden of mortgage repayments and business loans for millions of Britons.
‘Close Call’ for Policymakers
The BoE, which operates independently from government, is mandated to keep inflation at 2.0 percent. The most recent figures put the rate at 3.8 percent, slightly below expectations of 4.0 percent. The central bank last cut rates in August, lowering borrowing costs to their lowest level in two-and-a-half years amid concerns over the economic fallout from U.S. trade tariffs.
That August decision marked the fifth rate reduction since the BoE began its easing cycle in mid-2024, shortly after Labour’s general election victory. There was no monetary policy meeting in October, leaving markets especially alert to this week’s outcome.
“Thursday’s decision will be a close call,” said Neil Wilson, UK market strategist at Saxo. “Governor Andrew Bailey could decide to wait until after the budget—or move early to reinforce his recent dovish tone.”
Britain’s economy expanded just 0.3 percent in the second quarter, down from 0.7 percent growth in the first three months of the year, underscoring the fragile recovery facing both policymakers and the new government.
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