The British Pound remained steady on Thursday ahead of the Bank of England’s upcoming policy decision, with markets widely anticipating the central bank will reduce borrowing costs for the sixth time in this cycle and the fourth time this year.
Investors are largely expecting a 25-basis-point cut in the Bank Rate, from 4% to 3.75%, driven by slowing inflation, a softer labour market, and sluggish economic growth.
The Monetary Policy Committee, responsible for setting rates, has been closely divided in recent months, having narrowly voted 5-4 to maintain rates last month.
The factors supporting renewed easing are starting to come together, including fresh signs of weakness in both the economy and the labour market, although it is important to watch how Bank of England members justify their decisions, Reuters news agency reports.
Sterling was largely unchanged against the Dollar at $1.3373 at the time of writing, following a decline the previous day after official data revealed a sharp slowdown in inflation.
British consumer price inflation dropped to 3.2% in November, its lowest level since March, compared with a median forecast of 3.5% in a Reuters poll of economists.
The data confirms that price pressures have definitively peaked, with expectations for an additional 75–100 basis points of monetary easing through 2026, according to analysts.
However, investors are currently pricing in just one more 25-basis-point rate cut in 2026, expected by April, with around a 70% probability of a second cut by the fourth quarter.
It is a busy day for European central banks, as Sweden’s Riksbank, Norway’s Norges Bank, and the European Central Bank are also scheduled to announce policy decisions throughout the day.
Against the Euro, the Pound slipped slightly to 87.85 pence.