At the year's start, investors anticipated six rate cuts from the Bank of England. However, as 2024 approaches its end, the benchmark rate is a full percentage point higher than expected. The Bank is likely to keep rates at 4.75% during its policy meeting, maintaining a gradual easing approach. Although Governor Bailey suggests four rate cuts in 2025, the market now expects only three next year, possibly starting in February.
The December 19 meeting is expected to see no change. Earlier predictions of six 25-basis-point cuts bringing rates to 3.75% have not materialized, with only two cuts in August and November. Tight labor markets and inflation concerns have delayed easing, positioning the pound as the best-performing G-10 currency.
This cautious stance has effectively curbed inflation, now slightly above the 2% target, demonstrating the efficacy of monetary policy.
