Rolling coverage of the latest economic and financial news
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It may not quite be on a knife-edge, but today’s Bank of England decision on interest rates is providing plenty of uncertainty for the markets to chew on.
At noon, the Bank’s monetary policy committee will reveal its latest decision on interest rates, which are currently set at 4%.
And while the odds are in favour of a hold, the money markets last night indicated there is a one in three chance that base rate will be cut to 3.75% today. That would be the sixth cut to borrowing costs since August 2024, as the Bank eased back on the restrictive policy imposed to cool inflation.
It’s certainly a tricky decision for the Bank. Although still too high, UK inflation was lower than expected in September at 3.8% – perhaps a sign that cost of living pressures are starting to cool.
Policymakers will also have noted that Rachel Reeves appeared to prepare the ground for tax rises – which would be disinflationary, and hurt growth – in a rare pre-budget speech this week.
Danni Hewson, head of financial analysis at AJ Bell, says:
“It’s possible Rachel Reeves’ surprise press conference on Tuesday was partly a cry for help to the Bank of England. By promising to push down on inflation, she might have been signalling that the Bank didn’t have to wait until after the Budget to cut rates. Whether they do or not is a finely balanced call.
A recent slowdown in wage growth could also persuade some of the Bank’s nine interest rates policymakers to vote for a cut.
Julien Lafargue, chief market strategist at Barclays Private Bank, explains:
“Recent economic indicators – including September’s lower-than-expected inflation, softer wage growth, and signs of slowing activity in Q3 – strengthen the case for the Bank of England to consider a rate cut this month.
However, this would be a very finely balanced decision as the central bank may see the upcoming Autumn Budget as a key missing piece of the puzzle. Should the MPC decide to stay put, a cut in December would still be on the cards in our opinion.”
8.30am GMT: Eurozone construction PMI for October
9.30am GMT: UK construction PMI for October
Noon GMT: Bank of England interest rate decision
12.30pm GMT: Bank of England press conference
Drinks giant Diageo has cut its forecast for sales and profits in 2026, as it faces up to a slowdown in demand across North America and China.
The maker of Pimm’s, Gordon’s gin, Johnnie Walker whisky and Smirnoff vodka now expects its organic net sales growth to be flat to slightly down, while organic operating profit growth is expected to be in the low to mid-single digits.
Diageo also reported a 2.2% drop in net sales in the last quarter, including “weaker results in China” where demand for white spirits fell, and a softer performance in North America where weak consumer confidence hit US spirits sales.
Nik Jhangiani, interim chief executive, said:
“Net sales were flat organically in Q1, with growth in Europe, LAC and Africa offset by weakness in Chinese white spirits and a softer US consumer environment than planned for.
We are not satisfied with our current performance and are focused on what we can manage and control; acting with speed to drive efficiencies, prioritising investment and adapting more quickly to an evolving consumer environment.
Uncertainty over this month’s budget is hurting the economy, UK broadcaster and content creator ITV has warned.
ITV told the City this morning that advertising demand has weakened this quarter, with businesses showing “widespread caution” ahead of the budget on 26 November.
As a result, it is planning to make £35m of “temporary savings”.
Carolyn McCall, ITV’s chief executive, told shareholders:
“UK macro data is showing a softening economy, with increased uncertainty in the lead up to the UK Budget which is impacting the wider advertising market, and we are adjusting our costs to match this current reduction in demand.
Those cost-adjustments include £20m of savings by moving some programming from this year into 2026.
ITV will also make £15m of non-content savings, through “reduced discretionary spend” and by cutting marketing spending.
Speculation about the timing of rate cuts is reaching fever pitch, reports Kathleen Brooks, research director at XTB:
Interest rates are expected to remain on hold, and there is only a 24% chance of a rate cut, however there is a whisper, that is getting louder, that the BOE should surprise markets and cut rates today due to the deteriorating economic backdrop, and weaker than expected inflation for September that did not reach the BOE’s expected peak of 4%.
We expect the BOE to keep rates on hold on Thursday, since the most prudent course of action is to wait until after the Budget. This is expected to see unprecedented tax rises, which could slow growth and may boost inflation if fuel duty relief is scrapped or if VAT is increased.
The effect of any tax increases would be known by the next Monetary Policy Committee meeting in February, so that might be the most prudent time to cut rates, in our opinion. The market seems to agree; there is a 56% chance of a February rate cut priced in by the swaps market ahead of this BOE meeting.
Japanese bank Nomura have predicted the Bank of England will cut rates today.
Last Friday, Nomura said they expect “a hawkish cut”, telling clients:
We expect the Bank of England to cut rates by 25bp at its 6 November meeting and to remove from its guidance any reference to interest rates being “restrictive” and the need for further cuts.
We believe weaker data over the past month support a rate cut, but that there is probably only one voting configuration (5-4) that can deliver it. Swing voters Bailey, Breeden and Ramsden will likely be needed to vote for a cut to get it over the line.
We think a rate cut is a close call (we’d put our probability at just 60%), and note that consensus forecasts and market pricing are for no change in rates. The greatest risk to our November cut view is that the MPC opts to wait for substantially more news published ahead of the December meeting.
Today’s decision on interest rates will be taken by the nine members of the Bank’s Monetary Policy Committee.
These experts have a range of views about the correct stance of monetary policy, veering from doves who favour lower rates to protect the economy to hawks who want to prioritise the fight against inflation with higher borrowing costs.
Two members – Alan Taylor and Swati Dhingra – are certainly in the dovish camp, while Catherine Mann and Megan Greene are on the hawkish end of the table.
That leaves governor Andrew Bailey, chief economist Huw Pill, and deputy governors Sarah Breeden, Dave Ramsden and Clare Lombardelli.
The last rate cut, in August, was a 5-4 split – backed by Bailey, Breeden, Dhingra, Ramsden and Taylor (who had initially wanted an even larger reduction).
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
It may not quite be on a knife-edge, but today’s Bank of England decision on interest rates is providing plenty of uncertainty for the markets to chew on.
At noon, the Bank’s monetary policy committee will reveal its latest decision on interest rates, which are currently set at 4%.
And while the odds are in favour of a hold, the money markets last night indicated there is a one in three chance that base rate will be cut to 3.75% today. That would be the sixth cut to borrowing costs since August 2024, as the Bank eased back on the restrictive policy imposed to cool inflation.
It’s certainly a tricky decision for the Bank. Although still too high, UK inflation was lower than expected in September at 3.8% – perhaps a sign that cost of living pressures are starting to cool.
Policymakers will also have noted that Rachel Reeves appeared to prepare the ground for tax rises – which would be disinflationary, and hurt growth – in a rare pre-budget speech this week.
Danni Hewson, head of financial analysis at AJ Bell, says:
“It’s possible Rachel Reeves’ surprise press conference on Tuesday was partly a cry for help to the Bank of England. By promising to push down on inflation, she might have been signalling that the Bank didn’t have to wait until after the Budget to cut rates. Whether they do or not is a finely balanced call.
A recent slowdown in wage growth could also persuade some of the Bank’s nine interest rates policymakers to vote for a cut.
Julien Lafargue, chief market strategist at Barclays Private Bank, explains:
“Recent economic indicators – including September’s lower-than-expected inflation, softer wage growth, and signs of slowing activity in Q3 – strengthen the case for the Bank of England to consider a rate cut this month.
However, this would be a very finely balanced decision as the central bank may see the upcoming Autumn Budget as a key missing piece of the puzzle. Should the MPC decide to stay put, a cut in December would still be on the cards in our opinion.”
8.30am GMT: Eurozone construction PMI for October
9.30am GMT: UK construction PMI for October
Noon GMT: Bank of England interest rate decision
12.30pm GMT: Bank of England press conference