Introduction: Bank of England expected to cut interest rates today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The wise men and women at the Bank of England could bring gifts for borrowers today, in an attempt to stave off a UK economic downturn.
The BoE is widely, and confidently, expected to cut UK interest rates at noon, from 4% to 3.75%. That would take borrowing costs down to their lowest level since January 2023.
The money markets indicate there is a 97.5% chance of a quarter-point rate cut, and only a 2.5% possibility that rates are left at 4%.
Wednesday’s drop in inflation, to 3.2%, suggests the cost of living squeeze is easing, which could reassure BoE policymakers that the consumer prices index is heading back towards its 2% target.
More worryingly, Tuesday’s rise in unemployment to a new five-year high suggests the UK needs easier monetary policy, especially as wage growth slowed too.
With the economy shrinking in October, investors are confident that at least five of the Bank’s nine policymakers will plump for a rate cut.
Sanjay Raja, Deutche Bank’s chief UK economist, says:
With disinflation progress on track, the labour market showing added signs of loosening, and GDP growth missing expectations, a Christmas rate cut looks all but certain.
More rate cuts will likely follow in 2026. But much will depend on forward looking indicators of price pressures – including firms’ CPI expectations, price expectations, and wage expectations – and the evolution of the labour market.
Lingering weakness in the quantities side of the labour market could elicit a more dovish reaction function in 2026.
In a busy day for central bankers, we’ll also get decisions from Norway, Sweden and across the eurozone – they are all expected to leave interest rates on hold, though.
The agenda
-
8.30am GMT: Sweden interest rate decision
-
9am GMT: Norway interest rate decision 9am
-
12pm GMT: Bank of England interest rate decision
-
1.15pm GMT: European Central Bank interest rate decision
-
1.30pm GMT: US inflation report for November
-
1.45pm GMT: European Central Bank press conference
Key events
With an interest rates cut today widely expected, borrowers will be curious to know how borrowing costs might change in 2026.
The City’s money markets predict at least one quarter-point cut next year (assuming we get one today).
Professor Costas Milas, of the University of Liverpool’s Management School, predicts Bank Rate will be cut to 3.75% today and remains at 3.75% in the first quarter of 2026.
He explains:
These forecasts are based on the most recent version of my interest rate reaction function, with Bank Rate depending on (i) the OBR measure of the output gap, (ii) a weighted average of inflation one-year ahead (which I predict to be 2.5 per cent both for 2026Q4 and 2027Q1) and current inflation, and (iii) economic policy uncertainty in the UK dropping (as the Budget uncertainty disappears) by 20 per cent between today and 2026Q1.
Whitbread shares jump as activist investor moves in
Back in the City, shares in hotel group Whitbread have jumped by 5.5% after an activist investor took a stake in the company.
Corvex Management has concluded that Whitbread, which owns the Premier Inns chain, is undervalued, and should review its current five-year capital plan.
Corvex, which has accumulated an economic interest in Whitbread worth just over 6% of its share capital, is urging the company to must evaluate all available strategic options and maximise value for all shareholders.
It says:
“Corvex invested in Whitbread because we believe the current market price reflects not only a discount to the Company’s fundamental value, but a discount to the value of the Company’s fully owned and operated UK freehold hotel portfolio alone. In our view, the current share price appears to ascribe no value to several meaningful components of the Company’s business, including its UK operated leasehold portfolio, its German hotel assets, and its development properties currently under construction and not yet trading.
“In light of this valuation disconnect, and following the recently announced UK Budget and changes to rateable values and business rates, we believe the Company should undertake a strategic review to assess its capital allocation priorities and overall strategic direction.”
Currys boss: reasons to be concerned about UK consumers
Sarah Butler
Currys boss Alex Baldock said there were “reasons to be concerned for the UK consumer outlook” as tax increases in the budget were weighing on sentiment.
After revealing a healthy 6% rise in sales in the UK and Ireland in the six months to 1
November (see earlier post), Baldock said the electrical goods retailer had outperformed
a technology market where sales sank just over 1% amid a “muted consumer environment”.
“We are not counting on any improvement in UK consumer outlook, confidence or spending looking forward,” he said. However, he added that Currys expected to take market share as it increased its ranges in sectors which were expanding such as gaming, coffee machines and AI computing.
Baldock would not comment on how the important Black Friday sales period went – amid rumours of a more muted than hoped for sales period for the retail sector. However, he said that changes to personal taxation announced by the Chancellor last month meant “consumers’ already high tax burden increased further.”
Baldock said Currys’ profits had been “resilient” – dropping £4m to £19m – in the half but against big increases in costs prompted by the 2024 budget including employers’ national insurance and minimum wage increases.
He said this year’s budget had been “less damaging” with business rates changes “marginally helpful” for Currys. But he warned that new workers rights under the Employment Rights Bill which has just been approved by parliament could “threaten the viability of part time flexible and entry level jobs” and cause big employers such as Currys to cut back on hiring next year.
Rates on hold in Norway too
Newsflash: Interest rates in Norway have been left on hold.
The Norges Bank’s Monetary and Financial Stability Committee has left Norway’s policy rate unchanged at 4%.
They warn that the outlook is uncertain, but have hinted that rates could be reduced further in the year ahgead.
Norges Bank governor Ida Wolden Bache says:
“We are not in a hurry to reduce the policy rate. The interest rate outlook is little changed since the September Report. In our projections, the average residential mortgage rate declines to just above 4.5 percent in 2028. As such, we do not envisage a large reduction in the policy rate ahead.”
Sweden and Taiwan leave interest rates on hold
Newsflash: Two central banks have just left interest rates on hold.
Sweden’s Riksbank has left its policy rate unchanged at 1.75%, and guided that “the rate is expected to remain at this level for some time to come”.
The Riksbank says:
The prospects for the Swedish economy are looking brighter. Although it will take time before economic activity returns to normal, the recovery is under way. At the same time, inflation has approached 2 per cent.
It warns, though, that the outlook for inflation and economic activity in Sweden is uncertain with risks at home and abroad.
The Riksbank explains:
The risk picture abroad is still marked by geopolitical conflicts, uncertainty regarding US foreign and trade policy, high asset valuations in financial markets and weak public finances in several countries.
In Sweden, there is also uncertainty around households’ consumption behaviour and the effects that next year’s more expansionary fiscal policy will have.
Taiwan’s central bank has taken the same decision, leaving its benchmark interest rate unchanged at 2％
BP shares swing after CEO change
Shares in BP are a little volatile this morning after the surprise departure of the oil major’s chief executive, Murray Auchincloss, last night.
BP was among the top risers on the FTSE 100 share index in early trading, with its shares up 1%.
But they have quickly reversed, and are now down 0.6%.
Auchincloss’s successor is Meg O’Neill, the head of the Australian oil company Woodside Energy. She’s expected to push on with BP’s drive to cut costs and reduce debt through asset sales, as it reverses away from its strategy to become a green energy giant.
The change at the top at BP could renew speculation that the company could become a takeover target.
Derren Nathan, head of equity research at Hargreaves Lansdown, says:
“In a world of J R Ewing style oil barons, BP has appointed Meg O’Neill as the first external candidate to take BP’s top job. She’s also the first woman to run an oil major. But the Colorado native is already an oil veteran. After 23 years at ExxonMobil, she joined Australia’s Woodside Energy in 2018, where she’s been CEO since 2021. One of her key milestones was the acquisition of BHP Petroleum, giving Woodside full ownership of the Scarborough Gas field and the Northwest Shelf LNG project.
With the sector facing pressure, consolidation is the talk of the town, but BP is most frequently seen as prey rather than the hunter. Rival Shell has distanced itself from takeover speculation, but there are other potential suitors. O’Neill may have a fight on her hands to ensure BP’s not sold for a song, and to keep a seat at the table if it were to join forces with a competitor.
Murray Auchincloss’s future has been in the balance ever since activist investor Elliott Investment Management took over a 5% stake in BP. Chairman Helge Lund went earlier in the year, and the legacy clear-out is now complete. Investors will now be hoping O’Neill has a firm plan to shore up the balance sheet, improve profitability and define BP’s role in the energy transition.”
Over in Beijing, China’s commerce minister has criticised the European Union’s investigations into whether Chinese companies are unfairly subsidised by the state.
The ministry said the EU’s Foreign Subsidies Regulation investigations severely impacted Chinese firms’ investment and business operations in the bloc, and China strongly opposes them.
China hopes the EU will immediately cease its “unreasonable suppression” of foreign companies, including those from China, He Yadong, a spokesperson for the ministry, said at a regular press briefing.
Currys grows profits by 144% despite ‘unhelpful’ cost headwinds
UK electricals retailer Currys has more than doubled its profits in the first half of the year, despite rising costs in the UK.
Currys, which sells computers and gaming products, and white goods such as televisions, fridges, washing machines and tumble driers, reported a 144% rise in adjusted pre-tax profits to £22m.
Group revenue rose 8% to £4.23bn in the six months to 1 November 2025, with like-for-like revenue up 4% in both the UK and Ireland division and the Nordics.
Alex Baldock, chief executive of Currys, says the company had healthy growth in sales, profits and cash flow.
In the Nordics, being the clear leader in an improving market, combined with strong execution, has driven another notable step forward in profits. It’s pleasing that strong top-line growth is translating into improved profitability.
In the UK&I, the consumer environment is more muted, and cost headwinds are unhelpful. Still, we’re the growing market leader, gaining share, and our margin and cost discipline is going a long way to mitigate headwinds and protect profits. In all markets, our big growth initiatives are paying off, our omnichannel model continues to win, and our growing services and solutions are great for customers and valuable to us.
Yesterday’s larger-than-expected drop in UK inflation, from 3.6% to 3.2%, made an interest rate cut at noon today even more likely.
Danni Hewson, head of financial analysis for AJ Bell, explained:
“Although 3.2% is still way above the Bank of England’s target, it is expected to be the final piece in the puzzle which will enable rate setters to deliver their own festive gift to borrowers with an interest rate cut on Thursday.
There are still massive question marks about what 2026 will bring and markets don’t expect the Bank of England to cut interest rates more than once or twice over the next year, so borrowers hoping to see a return to the ultra-low levels many people had become used to will have to adapt.”
ING: Bank of England deeply divided, but rate cut expected
Today’s decision isn’t expected to be unanimous; indeed, it could be another 5-4 vote.
That’s because the Bank’s monetary policy committee consists of four dovish committee members who worry about the weaker jobs market and slowing wage growth, and four hawks concerned about supply-side constraints in the economy and inflation persistence, plus likely swing voter Andrew Bailey.
But unlike in November, when five policymakers wanted to hold interest rates and only four favoured a cut, those numbers could flip at noon today.
Bailey is most likely to shift from the hawks to the doves, economists believe.
James Smith, ING’s UK economist, explains:
Stuck in the middle of it all is Governor Andrew Bailey. He sits between those two camps and almost certainly holds the deciding vote this week. Crucially, though, he wrote in the November meeting minutes that he has more sympathy with the doves.
It sounded like he was edging towards voting for a cut last month, but wanted more evidence that inflation was coming down. On the basis that inflation has largely come in line with the Bank’s forecasts since then, and if anything a tad below, we suspect he will favour a cut this week. That sets up a 5-4 vote in favour of lowering rates to 3.75%.
Introduction: Bank of England expected to cut interest rates today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The wise men and women at the Bank of England could bring gifts for borrowers today, in an attempt to stave off a UK economic downturn.
The BoE is widely, and confidently, expected to cut UK interest rates at noon, from 4% to 3.75%. That would take borrowing costs down to their lowest level since January 2023.
The money markets indicate there is a 97.5% chance of a quarter-point rate cut, and only a 2.5% possibility that rates are left at 4%.
Wednesday’s drop in inflation, to 3.2%, suggests the cost of living squeeze is easing, which could reassure BoE policymakers that the consumer prices index is heading back towards its 2% target.
More worryingly, Tuesday’s rise in unemployment to a new five-year high suggests the UK needs easier monetary policy, especially as wage growth slowed too.
With the economy shrinking in October, investors are confident that at least five of the Bank’s nine policymakers will plump for a rate cut.
Sanjay Raja, Deutche Bank’s chief UK economist, says:
With disinflation progress on track, the labour market showing added signs of loosening, and GDP growth missing expectations, a Christmas rate cut looks all but certain.
More rate cuts will likely follow in 2026. But much will depend on forward looking indicators of price pressures – including firms’ CPI expectations, price expectations, and wage expectations – and the evolution of the labour market.
Lingering weakness in the quantities side of the labour market could elicit a more dovish reaction function in 2026.
In a busy day for central bankers, we’ll also get decisions from Norway, Sweden and across the eurozone – they are all expected to leave interest rates on hold, though.
The agenda
-
8.30am GMT: Sweden interest rate decision
-
9am GMT: Norway interest rate decision 9am
-
12pm GMT: Bank of England interest rate decision
-
1.15pm GMT: European Central Bank interest rate decision
-
1.30pm GMT: US inflation report for November
-
1.45pm GMT: European Central Bank press conference
