The Bank of England’s Monetary Policy Committee (MPC) is expected to reduce the Bank Rate by 25 basis points to 4.75 percent on November 7, 2024, in light of easing inflationary pressures. Recent data shows UK inflation has dropped from 2.2 percent in August to 1.7 percent in September, prompting a shift from a restrictive monetary policy to one that supports economic growth.
The real economy is currently facing mixed signals. Core inflation fell from 3.6 percent in August to 3.2 percent in September year-over-year, and from 0.4 percent to 0.1 percent month-over-month, indicating a broader moderation in price pressures. However, stagnant wage growth continues to squeeze household budgets, potentially dampening consumer spending. While unemployment has slightly decreased from 4.1 percent to 4.0 percent, the tight labour market is showing signs of cooling, which could further justify a rate cut if it dampens consumer confidence.
Since the last MPC meeting, the RPI and RPI-P indicates that economic activity is falling behind market expectations, raising concerns about growth. This context suggests a likely unanimous vote for the 25-basis point cut, although discussions around a more aggressive 50 basis point move may arise if stronger action is deemed necessary.
Recent fiscal measures in the Budget aimed at boosting consumer spending could provide additional room for the MPC to maneuver without jeopardizing inflation targets. Overall, the November 7th meeting is pivotal, as the anticipated rate cut aims to alleviate high borrowing costs, support consumer spending, and foster economic growth while ensuring the MPC remains vigilant about inflationary risks.