UK inflation rising to 3.6% in the year to October, a fall from the three preceding months, means a Bank of England rate cut in December is now very likely, predicts the CEO of global financial advisory giant deVere Group.
The prediction from Nigel Green comes as the latest official figures show that consumer price inflation in the UK has cooled to 3.6% in October, down from 3.8% in September.
At the same time, the Bank of England’s November Monetary Policy Committee minutes reveal the committee voted by a narrow 5-4 majority to maintain the Bank Rate at 4%, with four members preferring an immediate 0.25 percentage-point cut.
These twin developments suggest the stage is being set for a December rate adjustment.
Nigel Green comments: “When the Bank Rate shifts it transforms the baseline assumptions for cash, credit and capital alike.
“For savers, the implications will arrive quickly. Cash held in deposits and fixed-term products will earn less as reference rates decline.”
“Savers who stay entirely in cash when inflation remains above target and interest rates are falling are likely to see real returns erode.
“With inflation still at 3.6% and deposit yields poised to move downward, the risk of negative real returns looms.”
For investors, the shift triggers a different dynamic. A lower Bank Rate reduces the discount applied to future earnings, altering valuations across equities, bonds and real assets.
Nigel Green states, “A policy-step of this kind lifts the value of future cash flows. The early adopters in such environments stand to benefit; those who cling to yesterday’s assumptions may be late to the party.”
Various segments, long-duration equities, infrastructure, real-estate plays and selected credit, typically attract interest at the onset of an easing cycle, though firms and investors must still manage fundamentals and timing.
The macroeconomic backdrop provides further justification for a cut. The Bank of England judges that inflation has peaked and notes growing slack in the labour market even as wage growth moderates.
With growth weak, consumption subdued and business investment muted, the environment aligns with a rate-cut narrative.
“We believe that there’s now a high probability of a Bank of England December rate cut.”
Savers previously benefited from elevated deposit rates during the recent high-rate regime. As the Bank shifts, those gains will unwind.
Nigel Green advises: “Savers need to review the composition of their holdings. Cash remains necessary for short-term needs, but surplus funds should be directed where real yields can recover ahead of inflation.”
Investors must also prepare. Falling policy rates open an opportunity window, but they do not erase risk.
“Lower rates alter the framework, but they don’t replace rigorous selection. The re-pricing begins when a cut is expected, not when it happens. Those who wait may see the move priced in ahead of them.”
Currency and global‐flow effects add further layers. “A UK rate cut could weaken sterling, impacting international holdings and export‐sensitive companies.”
He concludes: “The likely December rate reduction by the Bank of England marks a transition point. For savers, this means challenge; for investors, it means opportunity for those who act with insight.”