Commenting ahead of the Bank of England base rate change, Chris Arcari, Head of Capital Markets, says:

“Despite the larger than expected rise in net spending unveiled in the autumn Budget, and the OBR's forecast of higher near-term inflation as a result, the Bank of England (BoE) is expected to lower rates 0.25% p.a. tomorrow. Headline inflation came in at a below-target pace of 1.7% year-on-year in September and while still elevated, service sector and wage inflation are coming down more quickly than the BoE anticipated in their previous monetary policy report. This opens the door for the BoE to lower interest rates, while still maintaining a relatively restrictive policy stance - that is, real short-term rates would remain materially positive even after a 0.25% p.a. cut. Looking further out, the front-loaded nature of the spending and the OBR's forecast impact on near-term growth and inflation has seen the market shift to expect a slower pace of rate cuts from the Bank of England.”