Economists fear the Bank of England will delay a cut in the base rate despite a slowdown in the economy in a blow to home buyers.
Figures published this morning reported a 0.1 percent fall in the nation’s GDP which has triggered demands for the Bank’s Monetary Policy Committee (MPC) to take urgent action to boost the economy by cutting the cost of borrowing.
At the same time, the European Central Bank (ECB) cut interest rates for the Eurozone to boost struggling economies, particularly in France and Germany.
However, UK economists are expecting the Bank of England to hold off cuts in this country, which would help both families and businesses, until February at the earliest.
The EY ITEM Club expects the Bank of England to keep Bank Rate on hold at 4.75 percent at next week’s MPC meeting.
Its Chief Economic Advisor, Matt Swannell, said: “The message from the majority of the MPC at its November meeting was loud and clear: it intends to reduce Bank Rate ‘gradually’.
“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.
“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.”
Isaac Stell, Investment Manager at Wealth Club, warned against a delay in cutting rates.
He said: “The UK economy continued to lose momentum during October as GDP contracted by 0.1 percent.
“These latest figures will send a chill through the corridors of Westminster, as the Government’s growth agenda looks increasingly at risk and almost certainly opens the door to the possibility of one final rate cut before the year is out.”
Gabriel McKeown, Head of Macroeconomics at Sad Rabbit Investments, said: “The nation’s economic landscape resembles a high-stakes game of Jenga, with each sector precariously balanced and businesses poised for the possibility of collapse.
“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 told 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.”