Why chances of another interest rate cut this year are fading ...Middle East

Financial traders have reduced their bets on a cut taking place at November’s Monetary Policy Committee (MPC) meeting, and economic experts say the prospect of the rate dropping to 3.75 per cent is getting slimmer.

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The Bank pays close attention to economic growth and is often more likely to cut rates if the economy is performing badly because this can sometimes push inflation downwards.

Matthew Ryan, head of market strategy at financial services firm Ebury, said the “figures should ease pressure on the Bank of England to continue cutting rates”.

Thomas Pugh, economist at audit, tax and consulting firm RSM UK, said the latest figures would support the argument “that interest rates are not that restrictive [high] at the minute and is another mark against a rate cut in the fourth quarter of the year”.

According to bets placed by financial traders, the chance of a cut in November – the most likely timing according to most economists if there were to be a cut this year – has fallen from 42 per cent to 39 per cent.

The chance of another rate cut reducing will spell bad news for some mortgage holders, though news of the economy growing faster than expected is generally positive.

These customers are seeing reductions at the moment after the Bank cut rates last week, and would have been in line for more cuts if another were to follow.

Fixed mortgage rates tend to follow swap rates, which are based on long-term predictions for where the Bank of England base rate will go in the future.

At the moment, swap rates have not moved dramatically on the latest economy figures.

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