The day that never comes is almost in sight. Investors currently think there’s a 65 per cent probability the Bank of England (BoE) will cut base rates next month. But as we’ve seen before this year, a two-in-three chance isn’t a done deal. Two releases next week should help clarify things: inflation data is published on Wednesday, with unemployment figures out the day after.
For the first time in several years, the latter will arguably have more bearing on the Monetary Policy Committee’s thinking than the former. Price growth finally returned to the 2 per cent target last month, and while there are lingering concerns about services inflation, some commentators are now more concerned about contractionary signs.
The UK economy may be starting to improve, but the labour market has been showing signs of weakness: wage growth having stabilised, the unemployment rate came in at 4.4 per cent last month, fractionally higher than expectations and the highest level since September 2021. With job vacancies also falling, next week’s data could convince the BoE that the time for rate cuts has arrived.