Interest rates live updates as the Bank of England decides

Good afternoon, and welcome to MoneyWeek’s interest rates live blog. We’ll be covering everything you need to know about Thursday’s Bank of England policy meeting, before and after the headline announcement.

If you haven’t already, make sure you visit MoneyWeek’s inflation report live blog for the key economic background to Thursday’s meeting. The headline: UK inflation rose to 2.6% in November, its highest level since March.

Interest rate expectations

Given the increase in inflation, alongside stronger-than-expected wage growth and the anticipated inflationary effects of the Autumn Budget kicking in next year, experts think it is unlikely that the Bank will lower interest rates at its December meeting.

“We don’t expect a cut this week,” says James Smith, developed markets economist at ING, “but better underlying inflation data could unlock faster easing in the spring.”

Similarly, Morningstar’s survey of FactSet analyst expectations suggests that the Bank is likely to hold rates steady at 4.75%.

More bad news for house buyers

Assuming interest rates do remain where they are, Sarah Coles, head of personal finance at Hargreaves Lansdown, says it’s “more bad news for [house] buyers” who are “faced with record-high prices and relatively high mortgage rates that show no sign of significant easing”.

It also complicates the picture for anyone in the market for a remortgage. “With some uncertainties remaining about the trajectory of rates and inflation, it may be worth locking in a rate as soon as you can,” says Coles. “That way if rates fall, you can shop around, and if they’re higher when your remortgage rolls around, you’ll have secured a better rate.”

Could the UK fall behind?

Interest rates in the UK are already higher than in other major economies. While the UK is currently in line with the US, the Federal Reserve is expected to lower interest rates by 25 basis points when it meets today.

Meanwhile, the European Central Bank lowered interest rates to 3.15% last week. Assuming the Bank of England keeps rates at 4.75% tomorrow, it could start to look like an outlier.

“The UK appears to be falling behind other central banks as they continue to lower the cost of borrowing,” says Tom Stevenson, investment director at Fidelity International.

While politicians will be desperate for interest rates to fall in order to stimulate economic activity, “the Bank of England will feel less inclined to add to its rate cuts” in light of today’s inflation reading.

How significant is November’s inflation reading?

Much is being made of the uptick in the CPI reading between October and November, and while it is one more reason why the Bank may hold rates as they stand tomorrow, one economist thinks it’s a relatively minor point.

George Lagarias, chief economist at Forvis Mazars, points out that prices only increased 0.1% month-over-month in November. The 2.6% figure is, he suggests, “slightly misleading” – prices rose six times as fast during October, month-over-month.

“The Bank of England should not worry about this month's inflation number,” he suggests. “Instead, it should look forward into 2025, to trade wars, the Chinese economy and US pro-cyclical policy to gauge how inflation might develop in the new year and adjust monetary policy accordingly.”

Why might the BoE be hesitant to cut rates?

There have already been two rates cuts from the Bank of England this year, and while borrowers, politicians and, to some extent, investors will be keen to see further falls, the Bank is likely to be cautious ahead of the New Year given the extent of economic uncertainty.

“The stubbornness of key elements of inflation and the heightened uncertainty surrounding the outlook will prevent the BoE from acting hurriedly around cutting interest rates further,” says Rob Morgan, chief investment analyst at Charles Stanley.

“With wage inflation remaining high, feeding into services costs, and a reacceleration of energy prices, the Bank will be wary of loosening too much too soon.”

Measures included in the Autumn Budget, such as elevated costs to employers through higher National Insurance costs and minimum wage increases, could continue to raise costs in the services sector, says Morgan.

“With two cuts so far this year, in August and at last month’s meeting, the BoE will no doubt feel it’s time to press the pause button again at its final meeting of the year.”

Elsewhere in interest rates

While we’ll have to wait until Thursday for the Bank of England’s interest rates decision, there will be a big announcement across the pond in the meantime.

The Federal Reserve is due to announce its interest rates policy today at 2pm Eastern time – 7pm in the UK.

Markets are anticipating a 25 basis point reduction in the Fed’s headline rate.

“The Fed is widely expected to cut the federal funds rate a quarter-point today, continuing their rate normalization plans in keeping with progress in reducing inflation,” says David Payne, chief economist at Kiplinger, MoneyWeek’s US sister site.

“However, the main story of the 2:30 pm EST press conference will be whether the Fed plans to continue cutting next year, or whether they will hold off given the new Administration's plans for further fiscal easing from tax cuts and possible upward pressure on inflation from tariffs.”

Payne adds that while Fed chair Jerome Powell is unlikely to comment directly on hypotheticals like these, sentiment in the wake of the announcement is likely to be driven by his perceived commitment to heading off inflationary trends.

‘’Investors are eyeing up another expected interest rate cut from the Federal Reserve later but may have to get used to the idea of interest rates descending in more spaced-out steps given the stubbornness of inflation,” says Susannah Streeter, head of money and markets at Hargreaves Lansdown.

To follow events in the US as they unfold, head to Kiplinger’s live Federal Reserve meeting blog.

TUC calls for interest rates cut

While most economists and market experts expect rates to remain unchanged, the Trades Union Congress (TUC) has called on the Bank of England to cut rates tomorrow, following today’s inflation reading.

Despite inflation returning to near target levels faster than many had expected over the past year, “the latest GDP and employment figures show the economy is still fragile and the priority must be turning this around,” says TUC general secretary Paul Nowak.

“So, it’s vital the Bank of England keeps moving and makes another interest rate cut tomorrow."

Thanks for joining us today. That’s all from us this evening, though as above, follow Kiplinger’s blog for live updates from the Federal Reserve’s meeting.

We’ll see you tomorrow morning for further analysis and commentary, ahead of the publication of the MPC’s summary and meeting minutes at midday.