Economists are convinced that the Bank of England will respond to the UK’s weak economic performance by cutting interest rates next week.

The Bank’s monetary policy committee will make its final decision of the year on Thursday 18th December, and a rate cut to 3.75% appears highly likely now that the economy shrunk by 0.1% in October.

Ruth Gregory, deputy chief UK economist at Capital Economics, says:

The surprise 0.1% m/m contraction in the economy in October was especially disappointing given the increase in manufacturing output, which rebounded after September’s cyber-attack induced hit, and is a further reason to expect the Bank of England to cut interest rates next Thursday.

Suren Thiru, economics director at the ICAEW, says a pre-Christmas interest rate cut is “nailed on”:

“These figures confirm an off-colour October for the economy, with pre-Budget worries paralysing activity across key sectors, despite a boost to manufacturing from Jaguar Land Rover’s return to production.

“This dismal outturn may have been followed by a similarly turbulent November with the damage to business and consumer confidence from the frenzied speculation ahead of the Budget likely to have frozen wider economic activity.

“The aftereffects from the Budget may mean that the UK’s economic prospects are poorer over the near term, with the growing tax burden and a weakening jobs market likely to keep growth notably lower than the OBR expects.

“With these downbeat figures likely to further fuel fears among rate-setters over the health of the UK economy, a December policy loosening looks nailed on, particularly given the likely deflationary impact of the Budget.”

TUC general secretary Paul Nowak urges the Bank of England to help families and businesses with a rate cut:

“Bringing our economy back on track after 14 years of Tory chaos was never going to be straightforward. A volatile international context is not making this job any easier.

“After years of falling living standards, consumer spending is still very weak.

“The Government acted to boost household incomes at the Budget – it raised minimum wage, benefitting millions across the country, cut child poverty and funded energy payments to support living standards.

“The Bank of England should now recognise the impact that the living standards crisis has had on families’ and businesses’ finances and spending – and must deliver further cuts in interest rates next week”

According to my LSEG screen, an interest rate cut is an 89% chance. Last month, the Bank split 5-4 when they voted to leave rates on hold, so it only needs one voter (likely governor Andrew Bailey) to switch sides….