Interest rates LIVE: Bank of England to announce major decision at midday

The Monetary Policy Committee (MPC) will meet today to determine whether the Bank of England Base Rate will change. Economists widely predict the MPC will reduce interest rates by 0.25% after inflation fell to an eight-month low in November. 

The base rate significantly impacts the cost of mortgages and loans, and influences the interest rates banks offer on savings accounts. It peaked at 5.25% in late 2023, but policymakers have since reduced it to 4% in the months following, as inflation has dropped to more manageable levels. It’s currently rising at a pace of 3.2% – far lower than the 11% highs seen during 2022’s energy crisis, but still higher than the Bank’s 2% target. The Bank of England typically raises interest rates when inflation is high to curb spending and slow price increases.

Consumer Price Index (CPI) inflation fell to 3.2% in November, from 3.6% in October, the Office for National Statistics (ONS) said. This was largely driven by food and drink inflation, which dropped to 4.2% from 4.9%, while alcohol and tobacco prices also eased.

Danni Hewson, head of financial analysis for AJ Bell, said: “Although 3.2% is still way above the Bank of England’s target, it is expected to be the final piece in the puzzle which will enable rate setters to deliver their own festive gift to borrowers with an interest rate cut on Thursday.”

James Smith, developed market economist for ING, said the sharp drop in November inflation “green lights” a December rate cut. He said: “Christmas has come early for the doves at the Bank of England, with inflation coming in well below expectations in November.”

Mr Smith said he was expecting inflation to edge higher in December, partly due to a seasonal spike in air fares.

However, he said the “latest drop in inflation fits into a broader body of evidence suggesting that price pressures are cooling”, adding: “We expect headline inflation to fall pretty close to 2% by May.”

He is forecasting another two cuts to interest rates in February and April next year.

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