The Bank of England is likely to reduce interest rates in its upcoming meeting, with strong market anticipation of a cut from 4.75% to 4.5%. This would mark the third decrease since rates peaked at 5.25% in August 2023. Influencing this decision are December's inflation figures and concerns regarding stagnating economic growth. While sentiment points to a 90% probability for this cut, rising inflationary pressures remain a concern, indicating potential challenges ahead.
The scene has been set for a rate cut next week, with December's dip in inflation and the flatlining economy taking centre stage.
Economic signals have been weak and services inflation has fallen back substantially since the last meeting of the MPC.
There's the possibility of a surprise, but a small one.
Although inflation has decreased significantly from its peak above 11% in mid-2022, it has recently crept back up to 2.5%.
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