Ahead of the Bank of England's interest rate decision: Inflation cools but remains high; market bets on a December rate cut.
2025-11-06 13:30:32
The Bank of England (BoE) will announce its key interest rate policy today, its last meeting before the autumn budget is released.
The market widely expects the central bank to maintain its benchmark interest rate at 4%. Although the latest UK inflation data shows some easing of price pressures, with the September CPI falling to 3.8%, a figure lower than market expectations, it also indicates that food and beverage price increases are slowing and household budget pressures are beginning to ease.
However, inflation remains well above the Bank of England’s 2% target, meaning policymakers are reluctant to shift to easing too early.
The focus of attention surrounding this interest rate decision is not just whether the interest rate will remain unchanged, but whether the Bank of England's wording signals a "path to interest rate cuts".
Some Goldman Sachs analysts believe that existing data may be sufficient to support an initial rate cut, and suggest a possible cut to 3.75% at this meeting. However, the prevailing market opinion remains cautious, suggesting that the central bank is more likely to remain on hold and postpone the key decision to the December meeting.
AJ Bell’s head of financial analysis said: “While the market has begun to bet on a rate cut, the probability remains low, and the current main inclination is for rates to remain unchanged.”
Inflation is not the only factor influencing the Bank of England's prudent decision-making; uncertainty surrounding fiscal policy also plays a role. Chancellor of the Exchequer Rachel Reeves will announce the Autumn Budget on November 26, which may include tax adjustments or the direction of fiscal spending, all of which will affect future inflation trends.
The Bank of England is clearly unwilling to change its interest rate path before the budget is announced, so keeping interest rates unchanged is the safest option.
GBP/USD is currently trading in the 1.3050-1.3070 range. The daily chart shows a clear downward channel, and the pair has been in a weak position for the past few trading days due to the pressure from a strong US dollar. The bears are still in control.
After breaking below the previous consolidation range, the price has recently tested the 1.3040–1.3060 resistance zone multiple times, but has failed to recover effectively, indicating that this area is gradually becoming a new top resistance zone.
If the exchange rate continues to be under pressure and falls below the psychological level of 1.3000, the daily chart structure will further open up downside potential, with a target of the 1.2710–1.2650 area, which may be the low point in April of this year.
Conversely, if the price can break through and hold above 1.3120, it would mean that the bearish momentum is weakening, and the price is expected to retest the previous rebound high of 1.3180, or even further test 1.3250.
Overall, the short-term trend is bearish, but the pace is still influenced by macroeconomic factors such as the UK budget and the uncertain interest rate outlook. The daily chart is characterized by significant upward pressure and limited rebound.
Editor's Note:
Considering the current economic environment and policy logic, this interest rate decision seems more like an inevitable choice to remain on hold. Although inflation has cooled somewhat, it is still significantly below the central bank's 2% target. Cutting interest rates before the fiscal budget is announced will increase policy uncertainty and may lead to market misinterpretations of policy direction.
From a risk management perspective, the Bank of England does have reasons to cut interest rates, but lacks a "window of opportunity" for doing so. For the currency market, the core drivers of GBP/USD volatility over the next two weeks will be twofold: whether the Bank of England's meeting rhetoric points to an easing cycle, and whether the autumn budget lowers inflation expectations.
If the market reaches a consensus on interest rate cuts, the pound faces the risk of weakening in the medium term. Therefore, caution is advised until a clear breakout direction is established, and investors should wait for the market to choose a direction.
The market widely expects the central bank to maintain its benchmark interest rate at 4%. Although the latest UK inflation data shows some easing of price pressures, with the September CPI falling to 3.8%, a figure lower than market expectations, it also indicates that food and beverage price increases are slowing and household budget pressures are beginning to ease.
However, inflation remains well above the Bank of England’s 2% target, meaning policymakers are reluctant to shift to easing too early.
The focus of attention surrounding this interest rate decision is not just whether the interest rate will remain unchanged, but whether the Bank of England's wording signals a "path to interest rate cuts".
Some Goldman Sachs analysts believe that existing data may be sufficient to support an initial rate cut, and suggest a possible cut to 3.75% at this meeting. However, the prevailing market opinion remains cautious, suggesting that the central bank is more likely to remain on hold and postpone the key decision to the December meeting.
AJ Bell’s head of financial analysis said: “While the market has begun to bet on a rate cut, the probability remains low, and the current main inclination is for rates to remain unchanged.”
Inflation is not the only factor influencing the Bank of England's prudent decision-making; uncertainty surrounding fiscal policy also plays a role. Chancellor of the Exchequer Rachel Reeves will announce the Autumn Budget on November 26, which may include tax adjustments or the direction of fiscal spending, all of which will affect future inflation trends.
The Bank of England is clearly unwilling to change its interest rate path before the budget is announced, so keeping interest rates unchanged is the safest option.
GBP/USD is currently trading in the 1.3050-1.3070 range. The daily chart shows a clear downward channel, and the pair has been in a weak position for the past few trading days due to the pressure from a strong US dollar. The bears are still in control.
After breaking below the previous consolidation range, the price has recently tested the 1.3040–1.3060 resistance zone multiple times, but has failed to recover effectively, indicating that this area is gradually becoming a new top resistance zone.
If the exchange rate continues to be under pressure and falls below the psychological level of 1.3000, the daily chart structure will further open up downside potential, with a target of the 1.2710–1.2650 area, which may be the low point in April of this year.
Conversely, if the price can break through and hold above 1.3120, it would mean that the bearish momentum is weakening, and the price is expected to retest the previous rebound high of 1.3180, or even further test 1.3250.
Overall, the short-term trend is bearish, but the pace is still influenced by macroeconomic factors such as the UK budget and the uncertain interest rate outlook. The daily chart is characterized by significant upward pressure and limited rebound.
Editor's Note:
Considering the current economic environment and policy logic, this interest rate decision seems more like an inevitable choice to remain on hold. Although inflation has cooled somewhat, it is still significantly below the central bank's 2% target. Cutting interest rates before the fiscal budget is announced will increase policy uncertainty and may lead to market misinterpretations of policy direction.
From a risk management perspective, the Bank of England does have reasons to cut interest rates, but lacks a "window of opportunity" for doing so. For the currency market, the core drivers of GBP/USD volatility over the next two weeks will be twofold: whether the Bank of England's meeting rhetoric points to an easing cycle, and whether the autumn budget lowers inflation expectations.
If the market reaches a consensus on interest rate cuts, the pound faces the risk of weakening in the medium term. Therefore, caution is advised until a clear breakout direction is established, and investors should wait for the market to choose a direction.
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