The British pound stabilized around $1.27, following comments by Bank of England (BoE) Governor Andrew Bailey, who suggested that the central bank could implement up to four interest rate cuts next year if inflation remains on its current downward trajectory.
Bailey outlined the possibility of reducing rates by a total of one percentage point, which would bring the key rate down to 3.75%. This marks a potential shift toward easing monetary policy, reflecting optimism that inflationary pressures could continue to abate.
Inflation Trends and Rate Expectations
During an interview, Bailey noted that inflation has been easing more rapidly than previously expected. Consumer prices are currently nearly 1% lower than earlier forecasts. Markets are now pricing in steady rates for December, with gradual rate cuts likely in 2024.
However, the latest data presents a mixed picture. Inflation unexpectedly rose to 2.3% in October, up from 1.7% in September, raising concerns about persistent price pressures that could complicate the BoE’s rate-cutting plans.
Challenges in the UK Services Sector
Adding to economic concerns, the UK’s services sector—a critical driver of the economy—continued to weaken. Employment within the sector declined for the second consecutive month, though the rate of job losses moderated compared to the previous month.
