BoE Preview: no present for Christmas

On December 19, t he BoE will not repeat the 25bp cut from November . We expect 8-1 Committee members to vote in favor of maintaining the policy rate unchanged . Overall, t he MPC will continue its careful “ gradual ” approach to easing in this cycle , especially as the UK’s fiscal policy will be expansionary next year. N e x t week ’s labor and inflation data are also unlikely to shift the MPC voting balance in favor of a rate cut. UK pay and services inflation d ynamics will likely edge higher, confirming ongoing price and wage stickiness in the UK economy. All in all , we believe that MPC members will prefer to adopt a wait -and-see-stance this month to better assess inflation trends in the period ahead . That said, the decision will echo Governor Bailey’s hints of four interest rate cuts in 2025, resulting in the Bank Rate a t 3.75% by the end of next year. We expect more rate cuts in 2026 as a margin of economic slack emerge s , with the Bank Rate reaching its terminal rate of around 2.5 % .