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Will the Bank of England spring a surprise rate cut today?
Economists at Barclays certainly think so.
The Bank’s Monetary Policy Committee (MPC) meets today to decide whether to move the base rate from its current level of 4% – and speculation is heating up.
Until recently, most analysts expected the Bank to hold steady. But a run of weaker-than-expected economic data has prompted Barclays to predict a 0.25 percentage point cut, taking the rate down to 3.75%.
Not everyone agrees. Economists remain deeply divided over whether the MPC will act now or wait until later in the year.
Markets are currently pricing in just a one-in-four chance of a cut – but with the Bank of England’s history of catching investors off guard, few are ruling out a surprise.
“The Bank looks likely to keep rates on hold on 6 November, despite better inflation and wage news,” said James Smith, developed markets economist, UK at ING. “The committee is deeply divided, and we don’t expect clear signals on the Bank’s next steps. But assuming the autumn budget goes as expected, a December rate cut now looks more likely than not.”
Harriet Guevara, chief savings officer at Nottingham Building Society, is among those that believes a rate cut is on the cards today given the run of weak data.
She said: “With a rate cut now widely expected, this week could mark the start of a new chapter for interest rates, and for millions of savers and borrowers.”
Mortgage rates have been falling in recent weeks in expectation that interest rates might be cut faster than previously thought.
Guevara continued: “On the mortgage front, any reduction in the base rate could signal a gradual easing in the cost of borrowing.
“While we’re unlikely to see an immediate change in mortgage pricing, those coming to the end of fixed deals later this year may find better options opening up.”
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