Inflation may not have come down as much as expected this morning, but it still fell in the 12 months to October, from 3.8% to 3.6%, which bodes well for a pre-Christmas rate cut. And make no mistake: a rate cut is something many people and firms around the country are desperately crying out for. Sentiment has been smashed to smithereens by this Government’s fiscal policies and general economic mismanagement — and a rate cut would provide an immediate pick-me-up. This month’s decision by the Bank of England to leave rates on hold was a close one, with four members of the Monetary Policy Committee (MPC) voting to reduce Bank Rate by 0.25 percentage points, to 3.75%.
Sadly, five members voted in favour of leaving rates on hold at 4%, with Governor Andrew Bailey preferring to join the inflation hawks. But with inflation finally playing ball, the chances of a cut next month when the Bank of England announces its decision on December 18 have just increased. For many people, that would be the perfect festive gift.
The economy and property market desperately need lower interest rates.
Households remain under intense pressure, as do businesses — and many are at breaking point, or sadly beyond.
Data published earlier this week showed that the number of individual insolvencies last month was 14% higher than in October 2024, while company insolvencies in October were 17% higher than the same month last year.
The economy is spluttering along, businesses are struggling with an immense tax burden and household budgets are being battered by rising costs. A trip to the supermarket these days can leave you stunned at the tills.
All in all, it’s a grim picture, and a rate cut could help alleviate the pain.
But borrowers, businesses and households shouldn’t hang out the bunting quite yet. A week today we have what is shaping up to be one of the biggest Budgets in decades.
How the markets react to whatever is announced by Chancellor Rachel Reeves next Wednesday, and what the Budget contains, will be closely scrutinised by the Bank of England. Literally anything could happen.
But overall, right now, I think we’re more likely to get a rate cut next month than not.
If Andrew Bailey and his colleagues deliver the cut so many desperately need, there’s a chance we could even enter 2026 with a spring in our step.