The Case for Further Interest Rate Cuts
The Bank of England’s decision to cut the base rate by 25 basis points (bps) last month has done little to spark confidence across the market. With job growth stagnating despite five previous cuts in the past year and higher borrowing costs squeezing businesses, a further reduction is desperately needed. However, with inflation still sitting above target, economists remain divided on whether another cut will arrive — and if it does, when.
25bps
Most recent rate cut by the Bank of England
4%
Expected CPI inflation peak in September
05-Apr
Split vote among the MPC for the last rate decision
3.25%
Deutsche Bank’s revised rate forecast for early 2026
Economists Divided Over the Path Forward
Market analysts are now pulling back their earlier optimism. Capital Economics has retracted its forecast for another 25bps cut before year-end, suggesting that the Bank of England may now move slower—or not as far—than expected.
This U-turn follows warnings that inflation will rise higher than previously thought due to increased energy and food prices. CPI inflation is now forecast to peak at 4%, double the Bank’s target, forcing analysts to reassess expectations.
Why We Disagree
The narrow 5–4 split in the Monetary Policy Committee (MPC) vote shows that inflation is not the only issue at hand. Alan Taylor, the MPC’s newest member and former adviser to Morgan Stanley and McKinsey, initially called for a more aggressive 50bps cut.
In a speech earlier this year, he said the UK was “in the last half mile” on inflation — advocating gradual rate reductions to achieve a soft landing and avoid recession. His stance reflects the growing recognition that further cuts are essential to prevent economic stagnation.
A Further Cut is Needed to Revive Growth
Mixed predictions have left many businesses and landlords uncertain. Yet the data paints a clear picture: growth slowed between April and June, unemployment is rising, and consumer confidence remains fragile.
The UK economy urgently needs another base rate cut this year to stimulate investment, boost spending, and restore momentum.
Lower borrowing costs will support lenders and brokers while putting more money back into circulation — creating jobs and strengthening the wider market. The August rate cut was a start, but the economy needs more decisive action.
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