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Bank of England Likely to Keep Bank Rate at 5.25% in November, Economists Say

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The Bank of England is expected to keep its policy interest rate, Bank Rate, at 5.25% on November 2nd, according to a poll conducted by Reuters. The majority of economists surveyed, 61 out of 73, believe there will be no change in the Bank Rate next week. However, 16 out of 28 economists said there is a high chance of another rate increase later this year. Despite inflation remaining at 6.7% in September, the highest among major advanced economies, economists do not anticipate a rate hike due to the impact of previous increases still being felt. The Bank of England’s target inflation rate is 2%.

James Smith at ING stated that the Bank of England kept rates on hold in September and there has been no significant data to change that position. He added that the data on wages and inflation was not significantly different from what was expected. The majority of economists in the survey believe that the first cut to Bank Rate will not occur until at least July, with a median prediction for a 25 basis point reduction in the third quarter. However, around one-third of economists expect the Bank to act earlier.

The poll also revealed that inflation is not expected to reach the Bank of England’s target until the second quarter of 2025. Economists predict that inflation will average 3.0% next year and 2.2% in 2025. Additionally, the UK is expected to avoid a recession, but the outlook for the economy remains weak. After likely contracting by 0.1% in the last quarter, the economy is forecasted to experience minimal growth of 0.1% in the first two quarters of next year. However, a closely watched purchasing managers survey is expected to show a further decline in business activity this month.

While the outlook for the UK economy remains modest, economists have stated that it is a story of slow growth rather than an outright recession. There is cautious optimism that the economy will rebound in the coming years, with growth predicted to reach 1.4% in 2023. The Bank of England is forecasted to reduce Bank Rate by 50 basis points in the fourth quarter, bringing it to 4.50% by the end of this year. This projection aligns with the European Central Bank’s likely timeline for rate reductions.

Overall, economists remain cautious about the UK’s economic prospects, with slow growth anticipated in the coming quarters. However, the majority of economists surveyed do not expect a change in the Bank of England’s policy interest rate in November, citing the impact of previous rate increases and stable inflation data.

More detail via Investing.com UK here… ( Image via Investing.com UK )

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