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Investing.com -- The Bank of England is expected to maintain its key interest rate at 4% in November, according to Deutsche Bank analysts, despite growing evidence of economic slowdown and easing inflation.
The decision, which Deutsche Bank describes as "finely balanced," comes as third-quarter GDP growth is running at approximately half the pace the Bank of England had projected, while private sector wage growth is tracking nearly 0.4 percentage points below the central bank’s forecasts.
September inflation data showed consumer prices tracking 0.2 percentage points below the Bank’s projections, with services inflation sitting 0.3 percentage points below forecasts.
Despite these dovish signals, Deutsche Bank believes the "goalposts for a rate cut have shifted" since the August decision, with the majority of Monetary Policy Committee members likely undecided ahead of key upcoming economic data releases.
The bank expects a 6-2-1 vote split to maintain rates, with external member Swati Dhingra and Deputy Governor Dave Ramsden voting for a quarter-point cut, while external member Alan Taylor pushes for a half-point reduction.
Deutsche Bank anticipates the central bank will revise its economic projections, with growth for this year revised higher but lowered for the next two years. The unemployment rate forecast is expected to edge higher, peaking at 5.1%, while inflation projections for two and three years ahead are likely to drop to just under 2%.
Looking ahead, Deutsche Bank maintains its prediction for a December rate cut, with Bank Rate expected to drop to 3.25% by mid-2026.