Economists have warned that hopes that the Bank of England will cut interest rates repeatedly over the next two months have faded due to the UK government’s latest budget.

These interest rate cuts generally reduce borrowing costs for consumers and businesses over time.

The likelihood of back-to-back cuts fell as the market digested last week’s announcement, according to Refinitiv data; The probability of an outage in November is currently 90%, while the probability of another outage in December stands at 65.2%. This has fallen sharply since last week.

The budget, which increases fiscal spending by 1.2% of GDP for next year, is expected to ease stagnation in the economy that would otherwise help reduce inflation, according to Pantheon Macroeconomics.

“Last month’s positive data flow, which put the Monetary Policy Committee (MPC) on the table for consecutive interest rate cuts in November and December, was erased by the budget,” said Robert Wood, Pantheon’s chief economist.

markets Reacted with hostility to last week’s financial statementSterling is falling rapidly and gilt yields (the interest rate paid by the government) are rising.

The Office for Budget Responsibility (OBR) estimates the budget will add 0.5 percentage points to the Consumer Price Index (CPI) in 2025.

In early October, Bank of England Governor Andrew Bailey suggested the MPC could take a more “aggressive” approach to rate cuts if inflation data continued to improve. However, Pantheon economists warned that the MPC will now act more cautiously against the inflationary effect of fiscal relaxation in the budget.

Pantheon said it expects the MPC to cut rates again this year, potentially at this week’s meeting, followed by another 25 basis point cut per quarter in 2025.

“All things considered, we expect another disruption this year at this week’s meeting,” Pantheon added. “This is one short of what we expected at the time of our last forecast review. The market is taking a similar view, with prices now reflecting a full 25 basis points of easing by March compared to pre-budget.”

Market expectations have also changed and now reflect a full 25 basis points of easing by March compared to pre-budget.

The picture is different in the United States, where economists still expect two rate cuts before the end of the year.

Like the MPC, the US Federal Reserve will meet on Thursday, one day later than usual Because of Tuesday’s electionsWith inflation still cooling, the Fed is expected to cut interest rates for the second time this year.

Fed policymakers, led by Chairman Jerome Powell, are expected to cut the benchmark interest rate by a quarter point to around 4.6%, following a half-point cut in September. Economists are predicting another quarter-point cut in December, and more cuts are likely next year.