City markets are now betting that the base rate will be cut by less than previously expected
An unexpected rise in the inflation rate for November, jumping from 1.7 percent to 2.3 percent, has dashed any remaining hopes for a December cut in the Bank of England's base rate, finance specialists have decreed. Meanwhile, City markets are now placing their bets on a deceleration in base rate cuts throughout 2025, which is currently pegged at 4.75 percent, rather than the quicker reduction previously anticipated.
She noted that although November’s interest rate slash might have kindled expectations for continuous reductions, it seems inflation will once again erect barriers. Coles further remarked: "For those looking for a new fixed rate, or with a remortgage looming, inflation is even more likely to trip them up."
"And while lower fuel prices had offered a glimmer of hope that could help offset some of the inflationary pressures from the higher energy price cap and food prices, mounting geopolitical tensions and rising crude prices suggest higher fuel prices instead." Earlier this year, City markets were forecasting that the base rate would drop by a full 1 percentage point, bringing it down to 3.75 percent by Christmas 2025. However, due to concerns about persistent high inflation, a smaller cut of 0.6 percentage points is now deemed more probable.
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