The Consumer Prices Index (CPI) measure of inflation could climb to 3 per cent in the first few months of next year, but the Bank of England is still likely to cut interest rates multiple times in 2025, economists have said.
Inflation hit 2.6 per cent in the latest reading, released on Wednesday morning, which was broadly in line with expectations.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the forecaster remined “comfortable” forecasting three rate cuts next year in February, May and November.
Paul Dales, chief UK economist at Capital Economics, said he expected four rate cuts in 2025.
How UK inflation compares to Europe and the rest of the world
Read MoreThe Bank’s Monetary Policy Committee (MPC) tends to lower interest rates as it becomes confident inflation is returning to its 2 per cent target.
Predictions of where interest rates will go in the future have a major bearing on Bank’s swap rates, which a key factor in mortgage pricing.
Mortgage experts have said that at the moment, lenders are likely to gradually reduce the price of their home loans in 2025 as rate cuts “feed through”.
“As those feed through it should help to ease mortgage rates, especially the shorter-term fixed rates.”
“Stable market conditions will be essential for significant rate reductions.”
What economists have said
“We do think that by the end of 2025, CPI inflation will have fallen back close to 2 per cent. But in the first half of the year, we suspect it will be a bit higher than most expect.
“The 2.8 per cent doesn’t incorporate any influence from the rise in national insurance [from the Budget]. I think that influence will come in over a longer time period. That said, businesses’ expectations for the growth of their own selling prices over the next year have started to rise”
“We remain comfortable forecasting three rate cuts next year (February, May and November) and one more in 2026, but we are beginning to contemplate whether the MPC will respond to persistent inflation pressures by holding rates in February, instead waiting until May to cut again. A lot rides on the MPC’s survey of pay settlements that will be published in the February Monetary Policy Report.”
“The Bank will hold interest rates tomorrow and we can expect four cuts to interest rates next year, bringing it to 3.75 per cent.
Thomas Pugh, economist at RSM UK: “The rebound in inflation to 2.6 per cent in November is probably the start of a gradual climb which will see headline inflation return to 3 per cent early next year.
“I’m still predicting four cuts in 2025, but risks are definitely weighted towards fewer.”
“The inflationary impact of policies announced at the Budget and expectations of stronger energy price inflation are two factors.”
“We expect the MPC to keep rates on hold in tomorrow’s meeting, and to gradually cut rates in 2025. However, we think the Bank will remain cautious given elevated wage growth, global uncertainty around the Trump presidency, and inflationary pressures introduced in the latest Budget.”
Read More Details
Finally We wish PressBee provided you with enough information of ( What will happen to interest rates, inflation and mortgages in 2025 – according to experts )
Also on site :