There is a buzz outside the bank of England.
City workers took advantage of the unusually mild weather to enjoy lunch outside, and there was also a temperature shift inside the bank.
The decision to hold rates at 4% made on narrow margins, and the interest rate interest thinks that inflation has dried up.
Governor Andrew Bailey said he wants to see if future developments confirm this view before cutting rates; Weakness in the labor market may also play a part.
The bank also noted last year’s budget measures – such as an increase in national employer insurance contributions – contributed to last year’s price pressures.
A key factor in future decisions will be the contents of the upcoming budget, which may ease price pressures with direct measures in fees, but also tax increases from pockets.
The Chancellor will take credit for creating the conditions for rate cuts by providing the right environment. But the bank’s report explains that last year’s budget measures have contributed to price pressures, and hiring reluctance by increasing employer costs.
Unfortunately it is the impact of the labor market that may have contributed to the views of the fixed rates looking to cut the cost of borrowing.
While the bank itself refuses to estimate about the contents of this budget, it knows the signs that concerns elsewhere, among consumers and businesses, may restrain the economy.
With consumer spending remaining cautious, it is expected that the economy will grow by 1.2% in 2026, less than the 1.5% it predicted this year – it will not be accepted by the treasury.
The interest rate panel has a lot to evaluate the budget – the scale and shape of the tax rate, help with tax bills and perhaps other cost of living challenges, and an increase in the national living wage.
According to the bank’s research, labor costs remain a factor of uncertainty for employers and also for consumer prices.
The rate is due to judge the impact of policies – and the usual monthly evidence on inflation, employment and more – at its next meeting in mid-December.
By, thus, holding the vote of the cast, it is the governor who may find himself wondering whether to play Santa – or Schrooge.
If not, economists are counting on a cut coming in February.
And how many more will follow?
The bank said it sees rates continuing on a “gradual path”. Some members remain nervous about continuing inflationary pressures.
Its research, for example, shows our inflation expectations are shaped by recent experience, and in particular, food price movements.
We are still focused on the impact of recent price increases, and there is a risk that people and businesses may be driven higher than wage increases or wage increases.
Meanwhile, hundreds of thousands of home owners could still face rising costs to modify their mortgages if rates remain elevated.
Lenders can expect more gifts in 2026, but they may only come gradually.