Economists are concerned that the Bank of England may postpone a reduction in the base rate despite an economic downturn, potentially impacting home buyers negatively. This morning’s figures revealed a 0.1 percent decline in the nation’s GDP, sparking calls for the Bank’s Monetary Policy Committee (MPC) to urgently lower borrowing costs to stimulate the economy.
Meanwhile, the European Central Bank (ECB) has reduced interest rates within the Eurozone to support faltering economies, notably in France and Germany. Yet, UK economists anticipate that the Bank of England will delay any cuts until at least February, which would benefit both households and businesses. The EY ITEM Club predicts that the Bank of England will maintain the Bank Rate at 4.75 percent at the upcoming MPC meeting.
Matt Swannell, Chief Economic Advisor at the EY ITEM Club, commented: “The message from the majority of the MPC at its November meeting was loud and clear: it intends to reduce Bank Rate ‘gradually’.”
He added, “With incoming data so far giving them no reason to chart a new course, the EY ITEM Club expects the Bank of England to stick to its ‘cut hold’ tempo and keep Bank Rate unchanged at 4.75 percent when it meets next week by a vote of 8-1 in favour.”, reports the Express.
The EY ITEM Club stated: “While activity has been a little weaker than the MPC anticipated, the EY ITEM Club doesn’t think it has been soft enough to sway a majority of members to vote for a consecutive cut in Bank Rate. Indeed, most MPC members’ remarks since the November meeting have emphasised the consensus on the Committee that some economic slack will be required to bring inflation sustainably back to target.”
However, Isaac Stell, Investment Manager at Wealth Club, cautioned against delaying a rate cut, saying: “The UK economy continued to lose momentum during October as GDP contracted by 0.1 percent.”
He added that the latest figures would send a chill through Westminster, putting the Government’s growth agenda at risk and potentially leading to one final rate cut before the end of the year.
Gabriel McKeown, Head of Macroeconomics at Sad Rabbit Investments, described the nation’s economic landscape as a high-stakes game of Jenga, with each sector precariously balanced and businesses poised for collapse. He stated: “Following today’s GDP figures, the UK finds itself at a critical juncture as we enter 2025, with the economy teetering between recovery and regression. Throughout much of this year, the economic narrative has been one of gradual deceleration, with Chancellor Reeves’s Budget doing little to boost business confidence.”
Colin Low, Managing Director at Kingsfleet, expressed concern to Newspage: “There’s little doubt that the Government’s persistent negativity about their ‘inheritance’ has further undermined the low levels of confidence that existed at the time of the election.”