Shares in oil companies jump after US sanctions Russian energy firms, while manufacturers see weak prospects ahead
Yesterday’s weaker-than-expected UK inflation report has sparked chat that the Bank of England could cut interest rates sooner than expected.
Deutsche Bank say there is now an “interesting debate” on whether there may be enough ammunition for the Bank’s monetary policy committee to cut borrowing costs as soon as its next meeting in early November.
What’s the case for November? Relative to the Bank’s projections, growth has surprised to the downside, private sector AWE growth has surprised to the downside, unemployment has risen in line with Bank expectations, and inflation now sits a healthy amount below the Bank’s projections. Indeed, one could make the argument that the ingredients for a November rate cut are there.
So, why not November? We think three things will be important for the MPC to see before dialling down restrictive policy again. One, the MPC may want to see some indicative signs that inflation expectations are coming down – and we should see some signs of tempering in the coming months as spot CPI slows in Q4-25. Two, the Budget. Consolidation is one part of the puzzle. The other is what the Chancellor does to trim 2026 CPI – something we think will be very important given our projections of ~2.6% y/y CPI next year. And third, pay settlements. The MPC has yet to see the Low Pay Commission’s NLW announcement and subsequently what that does to pay settlements. We won’t have much detail on private sector pay deals until after the November meeting. Put simply, there’s a lot more information to be had in December than November.
“The chips manufactured by the affected manufacturers are important parts used in electronic control units, etc., and we recognize that this incident will have a serious impact on the global production of our member companies.
“We hope that the countries involved will come to a prompt and practical solution.”
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