Bank of England cuts interest rates by a quarter point: Live updates – CNBC

The Bank of England cut interest rates by 25 basis points (bp) on Thursday, the second rate cut this year.

The widely expected cut will take the central bank's key interest rate, which began its easing cycle in August, to 4.75%.

— Karen Gilchrist

UBS said on Thursday that President-elect Donald Trump's victory in the US presidential election could prompt the Bank of England to cut interest rates faster in the second half of 2025.

While President Trump's tariff proposals are widely seen as inflationary, the resulting “loss of consumer and business confidence” could have a dampening effect on inflation, the bank's analysts said. said.

These pressures will primarily affect Europe (for which the US is its largest trading partner) and are likely to ultimately accelerate the pace of European Central Bank interest rate cuts. UBS now expects the ECB to return interest rates to a neutral level of 2% as early as June 2025.

However, analysts added that it could be reflected in the Bank of England's monetary policy from mid-year onwards.

The note said: “With stronger growth and the UK government announcing significant fiscal easing, the Bank of England expects a more moderate pace of rate cuts. However, there is a risk that the pace of rate cuts will pick up in the second half of 2025. It's increasing,” he said.

Analysts say the Bank of England is facing pressure to pause interest rate cuts in December as Labour's tax and spending budget boosts growth and inflation prospects.

Alan Monks, UK economist at JPMorgan, said in a note on Monday that BOE policymakers are sticking to their previously signaled “gradual approach” to rate cuts, keeping the benchmark interest rate above 4% until 2025. He said it is likely to be maintained.

“With a pro-inflationary budget in place, we expect the central bank to continue to emphasize a gradual approach to monetary policy easing and prepare for a pause in December,” Danske Bank said in a note on Thursday. I agree with this view.

Goldman Sachs said in a note last week that a third rate cut is scheduled for February, and that the central bank will then “roll in rate cuts” to bring the key policy rate to 3% by November.

Citi on Tuesday echoed those calls for a rate cut in February, but cited the government's “greater fiscal activism” as a reason for its caution. Although he did not disclose the number of reductions, he predicted that the reductions would be made consecutively starting in May.

— Karen Gilchrist

The Riksbank cut interest rates by 50 basis points on Thursday, signaling further rate cuts, as central banks around the world appear to be in line to ease monetary policy.

The first major cut in a decade brings the bank's key interest rate to 2.75%, following a previous 25 basis point cut in September.

“If the outlook for inflation and economic activity remains unchanged, policy rates could be cut again at the next monetary policy meeting in December and in the first half of 2025,” the central bank said in a statement.

— Karen Gilchrist

Britain's borrowing costs fell slightly on Thursday ahead of the Bank of England's interest rate decision, easing a recent rise that pushed gold yields to their highest level in more than a year.

By 9:30 a.m. London time, the 10-year bond yield was down 2 basis points to 4.536%, and the 2-year bond yield was down 3 basis points to 4.481%. Yields move inversely with prices.

Bond yields soared last week as investors pondered the extent of excessive borrowing and tax increases announced in the Labor government's October 30 Budget. That rally has since continued this week, with the 10-year Treasury yield hovering near its highest level since October 2023 following the results of Wednesday's U.S. presidential election.

Sterling rose on Thursday despite widespread expectations that the Bank of England would cut interest rates.

As of 8:43 a.m. London time, the pound was up 0.38% against the US dollar and 0.25% against the euro.

Interest rate cuts usually put pressure on currencies. Investors' focus will now turn to whether the Bank of England will continue its policy of easy monetary policy, following the recent announcement of a tax hike budget that some economists see as potentially inflationary. .

— Luxandra Iordake

The US Federal Reserve is also expected to announce its latest interest rate decisions on Thursday following the results of the US presidential election.

The Fed began its rate cutting cycle in September with a massive 50 basis point (bp) rate cut and is expected to cut rates by 25 basis points (bp).

— Karen Gilchrist

UK inflation plummeted to 1.7% in September, raising hopes that the Bank of England would cut interest rates in November.

The figure was lower than expected, significantly down from 2.2% in August, and the first time inflation has fallen below the BOE's 2% target since April 2021.

But analysts have suggested that the decline could be short-lived, with an increase in energy price caps set by regulators last month that could push prices up slightly. .

Britons face the prospect of longer mortgage rates after the government's tax and spending budget disappointed hopes for a series of short-term interest rate cuts.

Mortgage rates took a hit last week as many financial institutions raised borrowing costs on concerns that Reeves' fiscal plan could boost growth and inflation and delay the BoE's easing path.

David Hollingworth, associate director at brokerage L&C Mortgages, said in a statement on Friday: “This is a turbulent time for mortgage borrowers as base rates are expected to fall… but fixed rates are likely to rise. ” he said.

Virgin Money became the first major lender to increase mortgage rates after the Budget, increasing rates by 0.15%. However, some banks had a different outlook, with Santander lowering interest rates by 0.36 percentage points.

The average interest rate for a five-year fixed mortgage is currently 4.64%, down from 5.36% last year, while the average interest rate for a two-year fixed mortgage is 4.91%, compared to the same period in 2023, according to data from real estate portal site Rightmove. This is down from 5.81%. last week.

“This is not the kind of sudden interest rate spike that has depleted mortgage rates over the past few years. But if funding costs do not ease, the sub-4% five-year rate we have become accustomed to in recent months “Fixed rates could be under threat,” Hollingworth continued, noting that more lenders may reassess their rates in the future.

— Karen Gilchrist