The MPC’s interest rate cut cadence

Markets tend to like certainty. One way in which the MPC can foster this is by being as predictable as possible in its actions. Central bankers tend to avoid surprising markets as much as possible.

So far this year, the MPC has stuck to one 25 basis point cut per quarter. It has signalled that it intends to keep doing so.

“On a very simplistic measure of Bank behaviour, it’s time for a cut,” says Laith Khalaf, head of investment analysis at AJ Bell. “The Bank of England has been metronomic in its activity during this rate-cutting cycle, with base rate getting chopped back every three months since last August.

“This fits in with the ‘gradual and careful’ narrative expounded by the Bank. One year on from that first rate cut, the steady drum beat of the rate-cutting cycle demands another thump.”

Markets are pricing in a rate cut of 25 basis points, explains Khalaf. Anything besides this – either holding rates where they are, or cutting them by 50 basis points – would come as a shock and could provoke a backlash in the bond market.

Good afternoon, and welcome to our live coverage of the upcoming interest rates decision.

The Bank of England’s Monetary Policy Committee (MPC) announces its latest decision tomorrow (Thursday 7 August) at midday, and is generally expected to cut the headline rate by 25 basis points, to 4%.

That might seem unusual, given that inflation rose to 3.6% in June: well above the 2% inflation rate that the Bank of England targets.

We’ll go through the reasons why experts on the whole believe that the MPC will cut interest rates tomorrow in spite of persistent inflation, as well as explaining what an interest cut would mean for you and your money. Keep following our rolling coverage for all the details.