The Bank of England’s monetary policy committee is expected to cut interest rates to 3.75% at its meeting next Thursday, 18 December, though the fourth cut of the year is likely to be another close-run thing.
Financial markets are widely expecting a cut, but many economists reckon the vote will be a 5-4 majority, with BoE governor Andrew Bailey having the casting vote.
At the last two meetings, rates were held at 4.0%, with November's MPC seeing a 5-4 vote to hold rates, shifting from a 7-2 majority in September.
Barclays, HSBC and BNP Paribas are among those seeing a narrow 5-4 majority with Bailey switching from a hold to vote for a cut.
BNP said the committee's guidance is likely to remain broadly unchanged but will “lean hawkish, emphasising data dependence and a higher bar for cuts as policy approaches neutral.”
UBS said economic data since the last meeting "has been supportive" a December rate cut and that it would take "large surprises in the data" for the MPC to stay on hold.
With market expectations at over 90% for a cut, HSBC noted that Bailey has "not made any public comment that pushes back against market pricing".
All the banks expected at least one more cut in 2026, though they say economic data will need to back this up, with inflation continuing to ease.
Barclays and BNP expects only one cut.
With a cut well priced in, BNP's economists said "all eyes will be on comments about the path ahead – and as the BoE inches
closer to neutral rates, the bar for further cuts will only get higher."
Barclays said: "As Bank Rate is approaching neutral, we think the MPC will have a higher bar for further cuts but, based on our current outlook, conditions should validate one more 25bp cut in March 2026."
UBS said to expect two more 25bps rate cuts in 2026, in February and April, while HSBC sees three, adding one July, to bring the rate down to 3.00%.
"We think that policy will be returned to a neutral stance, and that a 3.50-3.75% range is too high for the UK neutral rate given its sluggish productivity growth."
Market analyst Michael Hewson provided more context, noting that the central bank appears fairly confident that inflation has peaked and that disinflation is now starting to kick in.
"With the November budget now in the rearview mirror there is a little less uncertainty around the economic outlook, with some on the MPC suggesting that some of the measures in the budget could exert some downward pressure on prices," he said.
The main perceived risk in November that prompted the likes of Bailey, and four others to keep rates where they were was concerns that inflation may well be stickier than they would like.
"This fear of inflation persistence which in some parts of the economy has eased could well prompt Governor Bailey to shift his vote towards a cut, however the jury remains out on the others like Megan Greene who appears to be of the opinion that could well be some upside risk."