Bank of England to Cut Four More Times in Response to Economic Slump
- Written by: Gary Howes
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The Bank of England is expected to cut interest rates four more times as a deepening economic slowdown accelerates the path toward lower inflation, according to Berenberg.
Berenberg economist Andrew Wishart says the central bank is likely to reduce Bank Rate from 4.00% today to 3.00% by July 2026, a more aggressive easing cycle than he and colleagues previously anticipated.
The first cut could arrive as soon as next Thursday, 18 December, marking a clear pivot toward growth support as economic momentum deteriorates.
Wishart says the UK economy has "faltered more dramatically than we expected," following news Friday that the economy shrank 0.1% month-on-month in October, which defied consensus forecasts for growth.
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The decline extends the cumulative fall in output since June to 0.4%, underscoring that the slowdown is not confined to isolated sectors or temporary disruptions.
More recent survey data suggests the weakness has persisted beyond October, reducing the likelihood of a near-term rebound.
Wishart says "deteriorating fundamentals rather than a Budget-related setback in confidence are to blame," pointing to slowing employment, weaker pay growth, and still-elevated inflation eroding household real incomes.
October's GDP breakdown showed a brief manufacturing boost from restarted car production, but this was overwhelmed by declines in services and construction.
Services output fell sharply, led by wholesale and retail, highlighting pressure on consumer-facing parts of the economy.
Wishart says this loss of momentum is bringing inflation down faster than expected, giving the Bank of England room to act sooner and more forcefully.
He describes the slowdown as "a necessary evil to get inflation down to acceptable levels."
Berenberg has cut its 2026 GDP growth forecast to 0.8% from 1.1%, warning that rolling quarterly GDP growth is now negative and poses downside risks to near-term activity.
