Interest rates expected to be held as Budget looms

Policymakers at the Bank of England are expected to keep interest rates at 4% following their last meeting ahead of the Chancellor’s Budget.

Some Bank watchers suggested: latest inflation data It could strengthen the possibility of a blackout, but most commentators think such a move is more likely in December.

In September, the Bank’s governor, Andrew Bailey, said he still expected further rate cuts, but the pace was slowing. would be “more vague”.

The bank’s base interest rate has an impact on the return on savings as well as the cost of borrowing for individuals and businesses.

The bank’s Monetary Policy Committee (PPC) will make its final announcement at 12:00 GMT and most analysts predict that this situation will remain stable.

The Bank of England has cut its benchmark interest rate by 0.25 percentage points every three months since August last year. However, this time this cycle is expected to be broken.

MPC members will closely consider rising prices, as well as the latest economic data on employment and wages, when casting their votes on interest rates.

In September, the inflation rate was 3.8%, well above the Bank’s 2% target but below expectations. According to this data, food and beverage prices increased at the lowest rate in more than a year.

This has eased some pressure on family finances and also led some analysts, including banking giants Barclays and Goldman Sachs, to predict interest rates will fall to 3.75% this month.

They expect a split vote in the nine-member committee. For the first time, each individual’s views on the MPC will be published alongside the wider decision.

Danni Hewson, head of financial analysis at AJ Bell, said the market gave a one in three chance of the interest rate being cut to 3.75%.

“The odds are still firmly in favor of a hold,” he said.

MPC members will be fully aware of the potential implications of the Budget to be announced by Chancellor Rachel Reeves on 26 November.

If the budget includes serious tax increases that do not increase inflation, the possibility of a reduction in interest rates in December may be strengthened.

Chancellor, a speech on tuesdayHe said the measures in the budget “will focus on reducing inflation and creating the necessary conditions for interest rate cuts.”

But details remain scarce until the Budget is released and further economic data will be released before the Bank’s next meeting in December, which could influence PPC members’ thinking.

“It is possible that Rachel Reeves’ surprise press conference on Tuesday was in part a call for help from the Bank of England,” said Ms Hewson of AJ Bell.

“By promising to reduce inflation, he may have signaled that the Bank does not have to wait to cut Budget rates. Whether they do it or not, it is a very balanced decision.”

Bank interest rates greatly affect homeowners’ borrowing costs; either directly for those using tracking interest rates, or more indirectly for fixed interest rates.

In recent days and weeks, many lenders have been reducing interest rates on their new, fixed deals as they compete for customs and anticipate future rate cuts from the central bank.

However, if the bank reduces the benchmark interest rate on Thursday or December, savers are likely to see a decrease in their returns.

Rachel Springall, of financial information service Moneyfacts, said many savers were “demoralized” by falling returns and still relatively high inflation, which was reducing the spending power of their savings.