The Weekly Brief
10-02-2025
Thought of the week
The Bank of England (BoE) delivered a 25 basis point rate cut last week following a weaker-than-expected December inflation print and recently softer activity data. Yet while the UK growth outlook has clearly deteriorated, price pressures remain firm. Inflation expectations have been picking up due to still-strong wage growth, rising energy prices and corporates signalling that they intend to respond to the October tax hike by increasing prices. In addition, the growth outlook may be more positive than business surveys currently suggest, with the large increase in public services spending announced in the Autumn Budget likely to provide a tailwind to growth this year, offsetting some private sector weakness. Absent a material softening in the labour market, investors expecting rapid UK rate cuts are likely to be disappointed.
Inflation pressures warrant BoE caution
Headline and core inflation, % change year on year

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