Bank of England has sent 'clear message' over interest rates, economist warns

Bank of England building
-Credit: (Image: Yui Mok/PA Wire)


The Bank of England has sent a 'clear message' about interest rates ahead of its latest announcement, according to one expert..

Economist have predicted that the central bank will keep interest rates at 5 per cent when the Monetary Policy Committee (MPC) meets on Thursday to make its latest decision.

The Bank of England’s (BoE) base rate, which affects interest rates on borrowing and saving, was cut to 5 per cent from 5.25 per cent in August - marking the first rate cut since 2020.

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Bank governor Andrew Bailey said policymakers were finally able to reduce rates because inflation had “eased enough”. However, he stressed that they “need to be careful not to cut interest rates too quickly or by too much”.

Matt Swannell, chief economic adviser at the EY Item Club, said the MPC "sent a clear message that back-to-back rate cuts were unlikely", suggesting the rate will remain at 5 per cent for now.

The latest official data showed that Consumer Prices Index (CPI) inflation remained at 2.2 per cent in August. Mr Swanell said this would likely not be enough to prompt the Bank to make another cut.

Sanjay Raja, chief UK economist for Deutsche Bank, agreed that the latest inflation figures "won’t be enough to trigger a surprise rate cut" on Thursday.

He said: "Instead, the MPC will likely take this as a positive sign that underlying price pressures are easing, and could warrant a further dial down of restrictive policy in November, when it conducts its next forecast update. The MPC will also have more information on the fiscal outlook, with the autumn Budget slated for October 30."

Rob Wood, chief UK economist for Pantheon Macroeconomics, agreed that August’s inflation reading "gives the MPC little reason to rush to cut interest rates again", with the data staying close to its expectations. He said another month of slowing prices in the services sector, which is watched closely by the Bank, would give rate-setters more "comfort".