4 November 2025: The Bank of England is expected to pause rate cuts this week

The Bank of England's Monetary Policy Committee is expected to maintain interest rates at 4% at its meeting later this week. However, the vote will be finely balanced after “a dovish round of data”, according to economists. The vote could again come down to the casting vote of the Bank’s Governor.

Only 7 of 42 respondents to a Bloomberg survey foresee a cut to 3.75%, a position reflected in market pricing, which implies a 25% chance of a reduction. However, several said the possibility is underpriced, and half of the respondents who voted expect it to be tight.

They predict five or six of the nine committee members will hold on Nov. 6, with Bailey bringing his deputy, Sarah Breeden, in behind him to tip the balance. Still, the consensus has started to unsettle in recent days, with Goldman Sachs, Barclays and Nomura forecasting a quarter-point reduction.

A cut is possible, but with interest rates close to neutral and inflation still nearly double the BOE’s target, but a hold is more likely, according to Bloomberg Economics. “The Central Bank will also want to know the contours of the budget on Nov. 26 before delivering further easing.”

A close decision is on the cards because the economic data is pulling both ways. Consumer-price inflation is far higher than the Bank expected at this juncture, but the economy is showing signs of strain elsewhere. Significant tax rises in the budget could squeeze it further.

Nigel Farage, leader of Britain's populist Reform UK, watered down some of his pledges on Monday, saying his party could not immediately implement substantial tax cuts if it won power because of what he called the dire state of public finances.

Reform, which has maintained around a 10-point lead over the governing Labour Party in the polls for months, had pledged to cut taxes by 90 billion pounds a year, a plan economists described as fanciful if it won the next national election.

Reform has taken full advantage of its ability to make policy announcements that will be long-forgotten when the country returns to the polls in 2029.

It is the latest step by Reform, better known for its sometimes chaotic campaigning against illegal immigration, to show a more pragmatic side before the next election.

"We are being mature, we are being sensible, and we are not over-promising," Farage told a press conference in the City of London.

Farage's comments appear to be an acknowledgement that his party would have to convince the markets that a Reform government could be fiscally responsible, after their reaction helped to force out former Conservative Prime Minister Liz Truss over her largely unfunded tax-cutting mini-budget in 2022.

Labour criticised Farage's plans, saying they would "take us back to austerity". At the same time, the opposition Conservatives accused his party of being a "one-man band with no experience of government" which could not be taken seriously on the economy.

But Farage blamed the Government and earlier Conservative administration for failing to manage Britain's high rate of borrowing and growing debt burden.

As the UK braces for the upcoming budget on November 26, Michael O’Leary, CEO of Ryanair, has strongly criticised the Labour government's economic strategy. O’Leary’s remarks, made before the government’s much-anticipated budget announcement, painted a grim picture for the UK’s future unless significant economic changes are made.

The Chief Executive of the UK’s most successful low-cost airline is well known for making radical comments on the economy.

O’Leary again did not mince words, declaring that the UK economy was “doomed” under the leadership of Chancellor Rachel Reeves and the Labour Party. The Ryanair CEO’s criticism focused on the government’s inability to deliver meaningful economic growth. O’Leary stated that the UK desperately needs growth, but the path to achieving it lies through selective tax cuts rather than taxing wealth or imposing higher taxes on industries like air travel.

The pound appears to have halted its recent slide, as the MPC meeting is considered critical in placing a floor under the currency. Yesterday, it managed to register a small gain, reaching a high of 1.3162 and closing at 1.3139.

Parts of the U.S. economy, particularly housing, may already be in recession because of high interest rates, U.S. Treasury Secretary Scott Bessent said Sunday, repeating his call for the Federal Reserve to accelerate rate cuts.

"I think that we are in good shape, but I feel that there are sectors of the economy that are in recession," Bessent said on CNN's "State of the Union" program. "And the Fed has caused a lot of distributional problems with their policies."

Bessent believes that, although the overall U.S. economy remains solid, high mortgage rates still hinder the real estate market. Housing, he said, is effectively in a recession that is hitting low-end consumers the hardest because they have debts, not assets.

Pending home sales in the United States were flat in September, according to the National Association of Realtors.

The Treasury Secretary characterised the overall economic environment as in transition.

Fed Chair Jerome Powell last week signalled that the central bank may not cut rates further at its December meeting, prompting sharp criticism from Bessent and other Trump administration officials. He believes that transition will only be complete when the Chairman of the Federal Reserve leaves his post in the Spring next year, although a few Trump supporters think he may go before that.

Federal Reserve Governor Stephen Miran, who is on leave from his post as chairman of the White House Council of Economic Advisers, said in an interview with the New York Times published on Saturday that the Fed risked inducing a recession if it did not swiftly lower interest rates.

Miran, who is due to return to his White House job in January, was one of two central bank governors who dissented from last week's Fed decision to cut interest rates by 25 basis points, arguing instead for a 50-basis-point cut.

Central Banks rarely make such radical cuts unless the economy is already in recession, a state questioned by many members of the FOMC.

Federal Reserve Bank of Chicago President Austan Goolsbee said he wants to see more data before deciding how to vote at the Central Bank’s December meeting. Still, he warned he’s more concerned about inflation than the labour market right now. “My mind is far from being made up going into the December meeting,” Goolsbee said yesterday. “I am nervous about the inflation side of the ledger, where you’ve seen inflation above the target for four and a half years, and it’s trending the wrong way.”

The Federal Government shutdown has reached its 34th day, making it the second-longest in history.

The Congressional Budget Office said in a letter outlining possible outcomes that the country’s economic activity will decrease because of reduced food assistance from Supplemental Nutrition Assistance Programme benefits, lower federal spending, and thousands of furloughed federal workers providing fewer services to citizens.

At the start, up to 750,000 federal workers could have been furloughed and not paid. Before it started, President Trump said he'd lay off "vast numbers" of employees and eliminate programmes during the shutdown, rather than resorting to traditional furloughs. Arguments over the first round of firings are still being determined in federal court. If the government succeeds, the administration plans to lay off about 10,000 people.

The dollar index continued its rally, which has now lasted five sessions, as it began a new week on the front foot. It reached a high of 99.99 and closed at 99.88.

Eurozone manufacturing activity stagnated in October as new orders flatlined and headcount fell, despite production continuing to edge higher for an eighth consecutive month, a survey showed yesterday. The final HCOB Eurozone Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, registered 50 in October, matching a preliminary estimate and up slightly from September's 49.8 but sitting exactly at the threshold separating growth from contraction.

"In the Eurozone's manufacturing sector, we can at best speak of a very delicate sprout of economic recovery," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, which sponsors the data.

Output expanded marginally for the eighth month in a row but showed little momentum, registering at 51 compared with 50.9 in September. New orders remained subdued, neither growing nor declining after over three years of near-continuous contraction.

The reduction in headcount accelerated slightly, extending the manufacturing sector's employment contraction to nearly two-and-a-half years. Companies reduced staffing levels despite delivery times from suppliers lengthening to the greatest extent in three years.

"Job cuts continued and even picked up a bit. This is the result of weak demand, which is forcing companies to cut costs or boost productivity," de la Rubia added.

It is an ongoing surprise that the ECB is not voicing concerns about the loss of manufacturing jobs across the region. The Central Bank appears unable to wean itself off its infatuation with inflation. Throughout its existence, the Bank has been confident in abrogating its responsibility for half of the economy.

In a speech which confirmed the ECB’s blinkered approach, Bundesbank President Joachim Nagel told Bloomberg that Eurozone economic data is not diverging from the ECB’s outlook, but policymakers are keeping their options open.

There was “absolutely no reason” to change borrowing costs last week, when the ECB kept its deposit rate at 2% for a third consecutive meeting, the Bundesbank president told the Table Today podcast in an episode released yesterday.

Deutsche Bank commented yesterday that the ECB’s firmer tone and improving growth outlook reduce the odds of renewed rate cuts. The message reinforces market expectations for a prolonged policy pause, keeping euro sentiment underpinned. The Eurozone economy is being looked at through rose-tinted glasses as its analysts continue to rejoice over the apparent defeat of inflation.

Deutsche Bank noted that policymakers sounded slightly more upbeat about growth prospects. Its AI sentiment-grading tool scored the October statement as almost neutral, extending the trend of progressively less dovish communications over recent months.

AI has become a cure-all for what ails economies today, but while it is doubtless a very significant tool, there should be wariness about the benefits of its application.

The Euro continued to lose ground at a moderate pace yesterday, falling to a low of 1.1505 and closing at 1.1519. There is support at 1.1480, which will interest investors should the single current challenge that level this week.

Have a great day!