Bank of England Can Get Ahead of the Curve With Half-Point Cut

The Bank of England interest-rate policy meeting on Thursday benefits from being accompanied by a quarterly economic review. The Monetary Policy Committee will have its latest outlooks on the economy and inflation at its fingertips. The ducks are forming in a row, and they’re quacking about everything slowing down — including consumer price increases and growth.

This ammunition should embolden policymakers into cutting the 4.5% official interest rate by 50 basis points, rather than just the quarter-point trim anticipated in the futures market. The balance of economic risks has clearly turned in an unfavorable direction; that calls for a more aggressive approach to give the economy a fighting chance. Bloomberg Economics expects the short-term inflation outlook to be revised significantly lower, bringing forward the date when the BOE’s 2% target is reached. The growth outlook is also poised to worsen as tariffs impinge on the scenario in the months and quarters ahead. As an additional kicker, crude oil prices have declined even further since the central bank compiled its forecasts.

Admittedly, a larger interest-rate cut is something of a long shot as central banks rarely like to surprise; September’s half-point reduction from the Federal Reserve didn’t land smoothly. With so much global uncertainty about US tariffs alongside a muddled domestic picture of higher taxes, above-target services inflation and an utter lack of clarity over the labor market, sticking with their slow-but-steady quarterly pace of 25 basis-point cuts is undoubtedly a safer option for UK policymakers.