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The Bank of England (BoE) is preparing for one of its most finely balanced policy meetings in recent years, as investors, households, and policymakers await its final rate decision before the Autumn Budget on November 26. While most analysts expect the central bank to keep its key lending rate steady at 4%, growing signs of a slowing economy and persistent inflation pressures have made Thursday’s decision far from straightforward.

A Divided Monetary Policy Committee

Economists widely predict that a majority of the BoE’s nine-member Monetary Policy Committee (MPC) will vote to hold the benchmark rate at 4%, marking the fourth consecutive meeting without a move. However, several major banks — including Barclays, Nomura, and Mizuho — argue there’s a strong case for a surprise cut to 3.75%.

Julien Lafargue, Chief Market Strategist at Barclays Private Bank, described the decision as “a very finely balanced one,” noting that weaker manufacturing output and stagnant retail spending could tip the scales toward a modest rate cut.

Dean Turner, Chief Eurozone and UK Economist at UBS Global Wealth Management, said this week, “It’s not about if the BoE will cut rates — it’s about when. With inflation trending lower and growth losing steam, rate reductions are inevitable. The challenge is timing.”

Inflation Stubborn but Slowing

UK inflation has held at 3.8% for three straight months — still nearly double the central bank’s 2% target but far below its 2023 peak above 10%. Wage growth, once the key driver of inflation, has begun to slow, and the unemployment rate edged up to 4.9% in September.

Allan Monks, Chief UK Economist at JP Morgan, said further “downside surprises” in inflation and the labour market could push the MPC toward a cut before the year ends. “If unemployment keeps ticking higher and core CPI services weaken, the BoE will have a clear case for a December move,” he said.

Oxford Economics echoed this sentiment, saying most committee members are more worried about cutting too early than too late. They are waiting for “sustained downside surprises” in data before making a decisive shift in policy.

Economic Growth and Policy Pressures

The British economy remains fragile. GDP growth for the third quarter barely expanded by 0.1%, while business investment fell for the second consecutive quarter. Mortgage costs remain elevated, putting pressure on households — and by extension, on the government to stimulate spending in other areas.

If the Bank holds rates steady this week, analysts at UBS expect a clear signal that a reduction could come “no later than February,” possibly even at the December meeting depending on budget outcomes and inflation data.

Fiscal Policy and the Upcoming Autumn Budget

The timing of this BoE meeting is critical, coming just weeks before Chancellor Rachel Reeves unveils the Autumn Budget on November 26. Reeves is expected to announce a mix of fiscal tightening and potential tax increases aimed at filling a fiscal gap estimated between £20 billion and £50 billion ($25–65 billion).

A potential rise in income tax, according to analysts, could help cool inflation by dampening household spending, giving the central bank more room to ease monetary policy in 2025.

Andrew Wishart, Senior Economist at Berenberg, said, “If fiscal tightening is front-loaded and includes tax hikes, it will take pressure off the BoE. We expect at least two 25-basis-point rate cuts next year, bringing Bank Rate down to 3.50%, and possibly another reduction to 3.25% in 2026.”

Market Reactions and Investor Outlook

Financial markets are watching closely. Sterling has weakened slightly this week, trading near $1.23, as traders bet on a 40% chance of a rate cut by December. Gilt yields have also slipped, reflecting expectations of lower borrowing costs ahead.

Despite uncertainty, most analysts agree the BoE’s next moves will set the tone for 2026. If inflation continues to ease and fiscal policy tightens, the UK could see its first sustained rate-cutting cycle in nearly four years — a potential relief for mortgage holders, small businesses, and investors alike.

As Dean Turner summed it up: “The BoE is walking a tightrope — cut too soon, and inflation could rebound; wait too long, and growth risks sliding into contraction. The next few months will define the Bank’s credibility and the UK’s economic path.”