How many more times will the Bank of England rescue Rachel Reeves? | Richard Partington

"In the economic gloom of Labour's first year in power, Rachel Reeves has had a reliable shred of comfort to cling to: five times since the general election, the Bank of England has cut interest rates. This week, in all likelihood, the chancellor will get a sixth to shout about, as Threadneedle Street prepares to reduce borrowing costs in an early Christmas present that will be seized upon by the Treasury. The view in the City is that a festive cut on Thursday is odds-on."

"After last week's disappointing October growth figures, the jobs market and consumer prices data due out on Tuesday and Wednesday before the rates decision are expected to confirm that inflationary pressures in the UK economy are fading. But while a cut will be good news for businesses, mortgage borrowers and the beleaguered occupants of Downing Street, attention will quickly shift to the prospects for 2026. How many more times could the central bank come to the chancellor's rescue? Here things are a bit more complicated."

"Reeves's increase in employer national insurance contributions has played a part in unemployment hitting its highest level since 2021. Photograph: Leon Neal/Getty Images That Britain's economy is in the doldrums should hardly come as a surprise. Continual tax speculation has sapped business confidence and household spending, while Reeves's increase in employer national insurance contributions has played a part in UK unemployment hitting the highest levels since 2021, during the height of the Covid pandemic."

Five prior Bank of England interest-rate reductions have coincided with a weak UK economy and a likely sixth cut is expected soon. Recent data are projected to show fading inflationary pressures, prompting the central bank to lower borrowing costs and providing relief for businesses and mortgage holders. Tax uncertainty and an increase in employer national insurance contributions have undermined business confidence and contributed to rising unemployment, which is at its highest level since 2021. Legacy damage from previous Conservative policy choices and external shocks, including US tariff measures, have also weighed on growth. The Bank must balance easing policy with the risk of future inflation and labour-market outcomes.

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