Live Markets: Here's why Bailey could push the BoE towards a cut

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04/11/2025 10:51

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HERE’S WHY BAILEY COULD PUSH THE BOE TOWARDS A CUT

Most analysts reckon the Bank of England will sit tight on Thursday, and markets agree, pricing in only about a one-in-three chance of a cut.

However, a handful of economists see room for a move lower, including Barclays, which expects a 25-basis-point trim to 3.75%% in a finely balanced 5-4 vote.

“Since eight of the nine Monetary Policy Committee members have signalled their voting inclinations, Governor Bailey will likely have the decisive vote, and we expect him to be swayed by the accumulation of evidence in weaker-than-expected data since September and the risk of more disinflation to come,” Barclays’ economists say.

They also flag that BoE has surprised investors in the past and market pricing is not a strong argument for not reducing Bank Rate.

The upcoming budget could be disinflationary, Barclays economists argue, pointing to softer demand and a medium-term drop in inflation as fiscal tightening kicks in.

British finance minister Rachel Reeves on Tuesday signalled possible broad tax rises framing her second annual budget as one of "hard choices" to protect public spending while reducing Britain's debt.

"Alongside the cut, much of the existing forward guidance is likely to remain, although the committee may deliver a hawkish cut by alluding to Bank Rate now approaching neutral," they add.

(Stefano Rebaudo)

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