Will The Bank of England Cut Rates Before ‘Wildcard’ Autumn Budget?

Better-than-expected inflation data is unlikely to convince the Bank of England’s Monetary Policy Committee to cut rates when it next meets on Nov. 5, with its decision due a day later. Markets don’t anticipate another cut before the year ends.

According to interest rate swaps data, traders think there is just a 30% chance of a rate cut at the MPC’s next meeting, which comes amid inflation data showing consumer prices rising by 3.8% in the 12 months to September. Though the rate of price increases was lower than expected, inflation remains elevated and is significantly above the Bank’s 2% target.

A cut at the Bank’s final meeting of the year on Dec. 18 is only 39% likely, the data suggests. Traders now anticipate the Bank’s next cut will be in February 2026, deeming that outcome 61.6% likely. That would leave the UK’s bank rate at 4% at the start of 2026, defying many traders’ original expectations of a trajectory of four quarterly cuts by the Bank in 2025. It would also mean the UK’s bank rate remains the second-highest among G7 countries— below only the US Federal Reserve’s.

Back home, significant fiscal uncertainty surrounds the Bank’s November decision. The government won’t be delivering its Autumn Budget until Nov. 26, so in an environment where tax rises sound more and more likely, plenty of financial stakeholders are deferring big decisions. The Bank may in effect be among them, as it waits to digest the potential impact on growth and inflation.

Grant Slade, Morningstar

“Inflation in late 2025 remains well above the BoE’s long-term target,” says Grant Slade, senior international economist at Morningstar.

“We think the BoE is likely to [keep rates on] hold throughout the remainder of the year. However, with the recent resurgence in inflation likely to prove transitory—particularly given that labor market conditions are finally beginning to weaken—we still expect interest rate cuts to resume in 2026.”

Why Is UK Inflation Still Elevated?

The UK’s economy has been buffeted by rising inflation this year, unlike last year when consumer prices increases initially slowed to the Bank’s 2% target in May 2024.

Several factors have contributed to this resurgence, and taxation is thought to be a primary contributor, after businesses passed on fresh increases to employer National Insurance contributions to consumers in the form of higher prices. Simultaneously, there have been seasonal trends driving prices higher, including rising energy costs from April, and higher food and transport costs during what turned out to be a relatively warm summer.

In its most recent inflation update, covering the 12 months to September 2025, the UK’s Office for National Statistics said that rising transport costs had played a key role over the year, with motor fuels, airfares, and “to a lesser extent”, vehicle maintenance and repair all featuring as upward influences.

Airfares fell nearly 30% between August and September this year, but the decline was not enough to turn this element of the statistical body’s transport “division” into a net downward contributor, as the most recent monthly fall was significantly smaller than that seen over the same period last year.

Will The Bank of England Cut Rates Again Before The End of The Year?

Though markets aren’t pricing in further rate cuts in 2025, there are contrarians. At least one fund house believes inflationary pressure is close to peaking and that the Bank of England’s concerns about labor market weakness—rising unemployment and declining job openings— could start to influence its decision making more tangibly.

“To be clear: Inflation is still running way above target. That said, we knew this at least six months ago, and the bulk of the increase is down to increases in administered [or] regulated prices and the hike in employer National Insurance contributions,” says Vasileios Gkionakis, senior economist and strategist at Aviva Investors.

“The latest news suggests that the labor market is in a worse state than it was assumed and the peak in inflation is likely lower than thought. The bottom line is this: There has been accumulating evidence that has caused the market to start repricing significantly the trajectory of BoE rates. I think the Bank will cut rates in December … and I still think the risks are for further downside, with the UK Budget now on the horizon.”

Others, however, are not so sure.

“We are not convinced,” says Matthew Ryan, head of market strategy at Ebury, a foreign exchange platform.

“It still holds true that UK inflation remains much closer to 4% than 3%, and still almost double the Bank of England’s 2% target, with no concrete evidence as of yet that price pressures have indeed peaked,” according to Ryan.

“In the absence of a marked deterioration in activity data, we think that the MPC will probably err on the side of caution and stay put for now, which should be marginally positive for the pound,” he adds.

There is, however, very little certainty. As a body independent of central government, the Bank of England has no influence on the Treasury’s plans for its delayed Autumn Budget, due Nov. 26. Chancellor Rachel Reeves, is thought to be preparing the ground for tax rises, but the Bank of England will not be able to react until it has seen the concrete policies announced.

“The real wildcard here is, of course, the Autumn Budget, as a tax-heavy, anti-growth fiscal policy could elicit a more dovish retort on the monetary policy side,” Ebury’s Ryan says.