29 October 2025: The Bank of England is expected to hold rates this quarter and resume cutting early 2026

The Bank of England is considered unlikely to cut interest rates again this year, given the “stickiness” of overall inflation, the fear that food inflation has not yet peaked and what measures the Chancellor will announce in next month's Budget.

The MPC only voted 5-4 in favour of the last cut, which happened in June. There are continued disagreements about the course of monetary policy. UK consumer inflation was 3.8% in September, nearly double the BoE's 2% target, but economists expect it to decline over the coming year.

About 87% of respondents (53 of 61) in the October 22 to 28 poll forecast that the BoE would hold its base rate at 4.00% on November 6. The central bank has cut rates by 125 basis points since August 2024.

Just over half, 34 of 63, expected the Bank Rate to remain steady this year, a shift from last month's survey when nearly 70% anticipated at least one reduction this quarter. The remaining 29 predicted one cut by December.

Interest rate futures now imply around a 58% probability of at least one cut by December, down from 75% last week.

Reform UK Leader Nigel Farage, who was shown to be considered by the majority of voters to be better equipped to lead the country than current Prime Minister Sir Keir Starmer, in a recent poll believes that Central Bank independence should be curtailed since in his opinion, there is little evidence that the MPC has made a better fist of controlling inflation since its inception more than thirty years ago.

He agrees with his friend Donald Trump, who believes that at the very least, the Treasury should be represented in the decision-making process.

The Bank of England will speed up the publication of minutes to its meetings with major banks and hedge funds after traders warned that the attendees may gain unfair access to market-moving information. The BOE has responded by accelerating the publication of minutes of the discussions from a 2-week delay to 7.30 a.m. the following morning.

The Bank has invited executives from firms including Balyasny Asset Management, Citadel, JPMorgan Chase and Co. and Rokos Capital Management to share views on “relevant themes and narratives in financial markets” in person with the rate-setting Monetary Policy Committee.

Named the Market Participants Group, the new forum will meet quarterly, with the inaugural discussion on Nov. 12, the week after the next BOE interest-rate decision.

The budget is still more than four weeks away. Still, even though it has dominated the UK financial markets for several weeks already, scrutiny of comments from the Prime Minister and Chancellor is expected to ramp up as Rachel Reeves moves ever closer to its delivery to the House of Commons.

The Chancellor's proposed tax raid on LLPs may force partners to work longer or reconsider their retirement plans, with significant financial implications for many professionals. It was reported last week that Reeves is targeting limited liability partnerships (LLPs) in a tax raid as she tries to fill a fiscal black hole.

The proposed 15 percent rate of national insurance contributions on LLPs, which currently don’t pay corporate tax on their profits, could add a £46,000 tax burden per partner.

The pound fell sharply yesterday, hitting its lowest level against the Euro in a year amid renewed concerns. Traders and investors believe that the Chancellor faces a more severe-than-expected shortfall in the country's finances.

Versus the Euro, it fell to a low of 1.1376 and closed at 1.1390.

US consumer confidence fell in October for a third straight month amid dimmer views of the economy and labour market.

The Conference Board’s gauge decreased by 1 point to 94.6, the lowest since April, data published yesterday showed. The median estimate in a Bloomberg survey of economists was 93.4.

The measure of expectations for the next six months fell in October to 71.5, the lowest since June, while the present conditions metric increased.

Confidence remains stuck below last year's levels as consumers fret about the labour market and the cost of living. Job growth has slowed significantly, inflation remains above the Federal Reserve’s target, and President Donald Trump’s tariff policies continue to drive heightened economic uncertainty.

The share of consumers who said the jobs market was currently challenging edged up to 18.4 percent. At the same time, the share saying jobs were plentiful increased to 27.8 percent.

The latest FOMC meeting will begin later today, with a decision expected tomorrow. Despite noticeable splits on Monetary Policy among members, Chairman Jerome Powell is expected to announce a 25-basis-point cut in his press conference following the end of deliberations.

This may be the first of a series of cuts that the FOMC pivots from fighting inflation to concerns about the labour market. The Federal Shutdown is driving uncertainty, since the Fed will have to shed its data-driven stance and become more driven by sentiment.

President Donald Trump said on Monday that he has a long list of people who could take over the leadership of the US Federal Reserve Board (Fed). He again criticised the current chairman of the institution, Jerome Powell, Reuters reported, "We have an incompetent head of the FB, we have a bad person at the FB, but he will leave in a few months, and we will have someone new in his place," Trump told business leaders at a dinner in Tokyo during his week-long trip to Asia. Powell's term ends in May next year.

Trump added that he wanted Treasury Secretary Scott Bessent to take over the central bank, but he declined: "I'm thinking about him for Chairman of the Federal Reserve, but he doesn't want to take the job. He likes being Treasury secretary, so we're not counting him."

The Fed is navigating an unusual period for the U.S. economy, and its future moves are more complex to anticipate than is typically the case. Hiring has ground nearly to a halt, yet inflation remains elevated, and the economy's mostly solid growth is heavily dependent on massive investment by leading tech companies in artificial intelligence infrastructure.

The Central Bank is assessing these trends without most of the government data it uses to gauge the economy's health. The release of September's jobs report has been postponed because of the government shutdown. The White House said last week that October's inflation figure may not even be compiled.

The shutdown itself may also crimp the economy in the coming months, depending on how long it lasts. Roughly 750,000 federal workers are nearing a month without pay, which could soon start weakening consumer spending, a critical driver of the economy.

The dollar index fell marginally yesterday as traders took a neutral view on the effect of a rate cut tomorrow.

It fell to a low of 98.57 and closed at 98.74.

The European Central Bank can ease policy further this year but must find a middle ground that neither induces a recession nor causes an undue delay in curbing inflation, according to Chief Economist Philip Lane.

If interest rates fall too quickly, it will be challenging to bring services inflation under control," Lane was quoted as saying on Monday.

"But we also don’t want rates to remain too high for too long, because that would weaken the inflation momentum in such a way that the disinflation process would not stop at 2%, but inflation could materially fall below target," Lane added.

A key condition for getting price growth under control would be a drop in services inflation, which has been stuck around 4% for most of 2024, Lane said.

But wage growth, one of the most significant factors in price pressures, will be "significantly" lower this year, further easing inflation, which stood at 2.4% in December.

While economic growth has been hovering just above zero for most of the past year, Lane said he did not see the kind of recessionary risk that would call for a dramatic acceleration in monetary easing.

A recession was also not necessary to get inflation under control, given that the conditions for taming price growth were already in place.

"What we will have to work out this year is the middle path of being neither too aggressive nor too cautious in our actions," Lane added.

France’s Socialist party leader has threatened to bring down Prime Minister Sébastien Lecornu’s fragile minority government by Monday if he does not agree to levy higher taxes on the country’s wealthiest, as discussions on the country’s 2026 budget intensify.

Olivier Faure, whose party holds a swing vote in the hung parliament, told broadcasters on Friday: “If there is no change, the Socialists will vote against the budget plans and call a no-confidence vote.

The threat serves as a reminder of the French government's perilous position as Lecornu seeks to avoid becoming the third premier to be voted out by parliament since President Emmanuel Macron’s ill-fated decision to call snap elections in June 2024.

Lecornu agreed to suspend Macron’s pensions reforms in his preliminary budget text last week, as an olive branch to the Socialists that allowed his government to survive two no-confidence votes earlier this month.

There is far brighter news emanating from the southern part of the region.

Spain is a rare bright spot among Europe’s otherwise drearily performing economies. Since the start of 2024, the Spanish economy has grown at an average annual rate of 3%, compared with just over 1% for the Eurozone as a whole.

In recent weeks, S&P Global Ratings has upgraded its credit rating, and the Bank of Spain raised its 2025 growth forecast to 2.6%, underlining the nation’s position as Europe’s fastest-growing major economy and one of the strongest in the advanced world.

The euro gained ground yesterday as investors sought a currency driven by stable monetary policy and low inflation. For now, the common currency fits the bill, but concerns will be raised if growth fails to pick up.

It rose to 1.1668 and closed at 1.1651. There is not enough momentum to challenge resistance at 1.1720, but there is strong support at lower levels.

Have a great day!