BoE Set to Cut Rates Tomorrow: Will Further Stimulus Follow?

London: 6 November 2024 (TraderMade): The Bank of England (BoE) is poised to cut interest rates tomorrow, but will it be enough to counter slowing economic growth and high inflation?

The Bank of England (BoE) is set to deliver its highly anticipated interest rate decision tomorrow, 7 November 2024. With stubbornly high inflation and the UK economy facing headwinds, analysts are overwhelmingly expecting a rate cut. However, the size and future trajectory of monetary policy remain key questions.

Key Takeaways

• All eyes are on the BoE's interest rate decision tomorrow.
• A 25 basis point rate cut to 4.75% is widely expected.
• The BoE must balance the need to curb inflation with fostering economic growth.
• The Bank's forward guidance on future rate cuts will be closely scrutinized.
• Fiscal policy from the UK government will also play a crucial role in steering the economy.

Market Anticipates a Rate Cut, But by How Much?

Financial markets are virtually unanimous in their prediction of a rate cut. According to a Reuters poll, all 72 economists expect the BoE to lower its benchmark rate from 5% to 4.75%. This would mark the second rate cut in 2024, following a previous reduction in July.

Inflation vs. Growth: A Delicate Balancing Act

The BoE faces a challenging dilemma. On the one hand, inflation remains persistently above its 2% target, currently hovering around 4.5%. This pressures the central bank to raise rates to cool down the economy.

However, the UK economy is showing signs of slowing down, with concerns of a potential recession looming. A rate cut would help to stimulate borrowing and investment, potentially boosting economic activity.

Summary

The BoE's decision tomorrow will likely see a rate cut, but the extent of future easing will depend on the evolving economic data. The Bank must carefully navigate the delicate balance between controlling inflation and supporting a fragile economy.

Market participants will be looking closely at the BoE's guidance for future rate changes and any potential government stimulus measures to gauge the overall economic outlook for the UK.