The Bank of England is likely to cut interest rates sooner and more sharply than markets anticipate, according to deVere Group, which now expects the first move in December followed by three reductions in 2025.
The firm said the Chancellor’s Budget removed the last major uncertainty holding back monetary easing, with cooling inflation and weaker growth strengthening the case for action.
Nigel Green, CEO of deVere Group, said: “While the Chancellor stepped back from the more aggressive tax rises that had been discussed earlier, the overall package is the highest tax burden on record, lower near-term inflation, and weaker already-fragile growth momentum.
“We now expect the Bank of England to cut rates in December and then follow with three more reductions in 2025. The data now supports it, the fiscal picture allows it, and the growth outlook increasingly demands it.”
The firm highlighted official figures showing the Budget’s measures, including rail fare freezes, fuel duty relief and steps to reduce household energy bills, could lower inflation by up to half a percentage point in the second quarter of next year.
This follows October data showing price growth easing for the first time in seven months, signalling a broader shift in inflation dynamics.
Green said the Budget’s significance lies in the clarity it provides. “The significance of the Budget lies less in dramatic tax changes and more in what it removes – policy uncertainty,” he said. “With fiscal risks clearer, the Bank can refocus on the direction of inflation and growth, both of which point toward lower rates.”
deVere noted that fiscal measures reducing everyday costs help stabilise household inflation expectations, which central bank officials view as critical to preventing wage and price pressures.
At the same time, the firm said the UK’s growth outlook is weakening as higher taxes and tighter public spending weigh on economic activity, making current interest rates increasingly restrictive.
Market expectations for a December cut rose immediately after the Budget, though deVere argues that investors still underestimate how far rates will need to fall as slower growth feeds through.
“We think three cuts next year is now realistic, not aggressive,” said Green. “Rates have already done their job on inflation. Keeping them too high for too long risks unnecessary damage to growth, employment and investment.”
The firm added that recent sterling weakness reflects softer growth prospects and expectations of a faster easing cycle, reinforcing the likelihood that rate cuts will be front-loaded.
“The pieces are now firmly in place: inflation is cooling, expectations are stabilising, growth is slowing, and fiscal uncertainty has lifted. We believe the Bank of England’s next cut is coming next month — and there will be three in 2026.”
