HSBC: The Bank of England is expected to hold interest rates at 5.25pc when it meets tomorrow – but money markets are predicting the Bank will reduce interest rates by a whole percentage point to 4.25pc by the end of next year. This is up from previous expectations that rates would fall by 0.75 percentage points in 2024.

UBS: Given the strength of wage growth in the UK, we think the BoE has more credibility in continuing to send a 'higher for longer' message than its counterparts in other developed countries.

Barclays: Although the vote will likely still be split, we expect the Bank of England to maintain the bank rate at 5.25 per cent. In our view, the MPC will also likely reinforce its message that the current monetary policy stance is restrictive but that, with risks to inflationary pressures being tilted to the upside, it’s too early to think about interest rate cuts.

BoE Member Comments:

  • BoE's Haskel: The reason I am voting to increase rates now is the same: I don't want the economy to get stuck in the bad situation of embedded inflation." [Dec 1]
  • BoE's Greene: “Policy is less restrictive than we'd thought. These shifts in the star variables suggest policy may have to be restrictive for an extended period of time in order return inflation to 2% over the medium-term.”
  • BoE's Gov. Bailey: “We're not in a place now where we can discuss cutting interest rates - that is not happening.” [Nov 29]
  • BoE's Ramsden: "We think that inflation is going to be really challenging to squeeze out of the system. It's driven by wages, where wage growth remains above 7%. The service sector in the UK is very labor-intensive. So these factors are what's leading us to think that inflation is going to stay stubbornly high through next year"[Nov 28]

December Poll: 

  • The BoE is to hold the bank rate at 5.25% through Q2 2024 (the same as the Nov poll) - Poll.
  • The BoE is to cut the bank rate to 5.00% in Q3 2024; 4.50% in Q4 (vs 4.75%, 4.50% in the Nov poll) - Poll.

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