Yesterday’s fall in inflation means Bank of England decision makers are certain to cut the base interest rate today, experts agree.

The inflation rate dropped from 3.6% to 3.2% in November, which was a bigger fall than analysts had expected.

Last time there was only a small reduction in inflation from 3.8% to 3.6%. It is still well above the Bank’s target rate of 2%, but the direction is encouraging.

Decisive

And last month, Governor Andrew Bailey’s (main picture) vote was decisive in a 5-4 decision by the Monetary Policy Committee against an interest rate cut. He is expected to go the other way this time around.

A poll of economists by Reuters revealed a unanimous forecast of a 0.25% reduction this time from 4% to 3.75%, and its lowest level in nearly three years.

Some experts even believe a 0.5% cut is possible, especially after disappointing economic growth figures released last week.

And other analysts are predicting further cuts at the next two MPC meetings, at the beginning of February and in mid-March.

We expect a rate cut on Thursday and two more next year.”

James Smith, Developed Markets Economist at ING, said: “November’s drop in UK inflation is just the latest sign that price pressures are abating and that the Bank of England has more work to do.

“We expect a rate cut on Thursday and two more next year.”

Suren Thiru, Economics Director at the Institute of Chartered Accountants in England and Wales, said: “These figures, alongside the recent deluge of downbeat data, mean that an interest rate cut looks certain.”

While Thomas Pugh, Chief Economist at RSM UK, said that the fall in inflation “effectively nails on a rate cut”.

Growing optimism

Nathan Emerson, CEO at Propertymark, says: “With inflation continuing to ease, there is growing optimism that the Bank of England will have the confidence to cut the base rate.

“Any reduction would provide a welcome boost to housing market confidence, improving affordability for buyers and offering relief to those approaching the end of fixed-rate mortgage deals.

“Lower borrowing costs would help stimulate activity, encourage more first-time buyers to take their first step onto the property ladder, and give existing homeowners greater confidence to move,” he says.

“While caution remains important, a shift towards lower interest rates would send a positive signal for both the housing market and the wider economy as we head into 2026.”

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