This pause in the rate-cutting cycle is anticipated to be temporary, with the EY ITEM Club expecting a return to rate reductions in the new year, though no firm commitment to a February cut is expected. 

Matt Swannell, chief economic advisor to the EY ITEM Club, said: “Since November’s decision to reduce Bank Rate to 4.75%, pay and inflation data have evolved as the MPC excepted.

“While activity has been a little weaker than the MPC anticipated, the EY ITEM Club doesn’t think it has been soft enough to sway a majority of members to vote for a consecutive cut in Bank Rate. Indeed, most MPC members’ remarks since the November meeting have emphasised the consensus on the committee that some economic slack will be required to bring inflation sustainably back to target.”

Following the September playbook

Mr Swannell added: “Given MPC members’ recent comments that they expect multiple interest rate cuts in 2025, December’s written guidance will likely take a page out of the September playbook and indicate a full assessment of the economic outlook in February.

“While this clearly stops short of a commitment to cut Bank Rate in February, the EY ITEM Club would view a February cut as likely provided the economic data develops as the MPC expects. The EY ITEM Club will also be keeping an eye out for any update of the Bank of England’s Agents’ survey of pay settlements for 2025, as this will be an important input into the committee’s thinking over the coming months.”

He concluded: “The EY ITEM Club does not expect the MPC to give a detailed update on where interest rates will head through 2025. Indeed, in recent weeks, some MPC members have cited the upcoming increase in employers’ NICs as a key source of uncertainty around the outlook.

“The Bank of England thinks this uncertainty will likely persist until at least the Spring, so unless there is a sharp weakening in demand in the first couple of months of next year, the EY ITEM Club doesn’t think the MPC will feel the need to deviate from the current “cut hold” tempo over the next few meetings.”