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The BoE to cut base rate again as growth stumbles:

January, 17, 2025-05:27

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The BoE to cut base rate again as growth stumbles:

The Bank of England is expected to resume cutting interest rates next month following recent official data showing weaker inflation and sluggish economic growth. Economic output grew by just 0.1% in November, according to the Office for National Statistics, falling short of the expected 0.2% but marking a return to growth after two consecutive months of contraction. Growth, which appears to have stalled in the second half of 2024, was primarily driven by the services and construction sectors, which helped offset a third consecutive monthly decline in manufacturing output.

Expectations for the pace and magnitude of Bank of England base rate cuts were gradually revised lower in the latter half of last year, as robust wage growth and inflation in services continued to challenge the central bank’s goal of bringing the Consumer Price Index (CPI) back to its 2% target. CPI, which has remained above the target for several months, decreased from 2.6% in November to 2.5% in December. Last year, the Bank of England implemented two rate cuts of 25 basis points each, reducing the base rate to its current level of 4.75% by the end of 2024.Luke Bartholomew, Deputy Chief Economist at abrdn, noted that "with inflation coming in softer, the ongoing weakness in growth will likely push the Bank of England towards further easing at its next meeting in February." However, he cautioned that it is "difficult to see" the bank shifting from its "gradual" approach to a more rapid easing cycle.