{"id":597197,"date":"2025-11-27T13:16:16","date_gmt":"2025-11-27T13:16:16","guid":{"rendered":"https:\/\/www.europesays.com\/uk\/597197\/"},"modified":"2025-11-27T13:16:16","modified_gmt":"2025-11-27T13:16:16","slug":"london-underperforms-as-bank-of-england-rate-cut-more-likely-after-budget","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/uk\/597197\/","title":{"rendered":"London underperforms as Bank of England rate cut more likely after budget"},"content":{"rendered":"\n

The FTSE 100 (^FTSE<\/a>) lagged behind its European peers on Thursday as traders continue to digest the aftermath of Wednesday’s budget announcement. Meanwhile, the pound (GBPUSD=X<\/a>) traded as high as $1.3268 early on Thursday morning, hitting its highest since 29 October, before retreating again.<\/p>\n

It comes amid relief that chancellor Rachel Reeves doubled her headroom to hit her fiscal rule for a balanced current budget in 2029-30, from \u00a39.9bn to almost \u00a322bn. This also pushed down UK borrowing costs<\/a> on Wednesday.<\/p>\n

This is despite the chancellor putting up taxes by \u00a326bn<\/a> after vowing last year that she would not \u201ccome back for more\u201d when raising taxes by \u00a340bn. Labour\u2019s manifesto also promised not to raise taxes on working people.<\/p>\n

She admitted she was \u201casking working people to pay a little bit more\u201d but insisted she had \u201ckept that contribution to an absolute minimum,” blaming US president Donald Trump\u2019s tariffs and former prime minister Liz Truss.<\/p>\n

Andrew Wishart, economist at Berenberg, said: “Taking the chance offered by a helpful official forecast to avoid hard decisions has increased the chancellor\u2019s and prime minister\u2019s chance of political survival.<\/p>\n

Read more: <\/strong>The autumn budget explained in five charts<\/strong><\/a><\/p>\n

“The fall in yields and strengthening of the pound is probably more due to the waning of political risk rather than any changes to official forecasts or the policy package.\u201d<\/p>\n

On the back of the budget speech, a cut in UK interest rates next month is now a near-certainty, with money markets showing 90% odds that Threadneedle Street lowers the base rate by a quarter of a percentage point at its 18 December meeting.<\/p>\n

This is up from around 85% earlier this week, before the chancellor’s budget. The City is also predicting over 60 basis points of cuts to Bank Rate by the end of next year, which indicates two quarter-point cuts are fully priced in with the possibility of a third.<\/p>\n

Nigel Green, CEO of DeVere Group, said: \u201cWe now expect the Bank of England<\/a> to cut rates in December and then follow with three more reductions in 2025. The data now supports it, the fiscal picture allows it, and the growth outlook increasingly demands it.\u201d<\/p>\n