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Bank of England interest rates decision 'nailed on' and 'more is to come' - DAILY EXPRESS
The International Monetary Fund (IMF) has also forecast two rate cuts before the end of the year.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: "A rate cut is never nailed on, but this time round it has at least had a decent dollop of No More Nails. So far, the Bank of England has been maintaining a single quarter-of-a-percent cut per quarter, and it looks on track to deliver the same next week."
She added that recent inflation figures, although stubborn in places, were largely due to global energy and utility costs rather than domestic overheating.
Smiling businesswoman enjoys coffee while working© Getty
"Governor Andrew Bailey has also made it clear that slightly higher inflation needs to be balanced against threats to growth. GDP fell in both May and June, and with a backdrop of heightened global uncertainty and trade wars, there are some powerful headwinds."
Economists at the EY Item Club also expect a cut next week, though with some dissent among policymakers.
"At its June meeting, the MPC was clear around its intention to reduce interest rates further, and most of the Committee will likely have seen enough since to deliver another cut at its August meeting," said Matt Swannell, Chief Economic Advisor to the EY ITEM Club.
"However, signs of lingering price pressures will mean the Committee remains cautious, with two of the hawkish MPC members expected to favour no change."
What it means for mortgages
For homeowners, the latest signs are encouraging - especially those looking to remortgage.
Sarah Coles said: "Fixed mortgage deals have been drifting gradually down for some time, with the average 2-year fixed rate falling from 5.2% three months ago to 5.03%.
"Assuming the rate is cut next week, we could see some competitive deals emerge after the announcement... If you have a remortgage looming, the coming days could be a great time to track down a good deal."
She also noted: "Cuts could be vital, especially for the top 20% of earners. The HL Savings and Resilience Barometer shows they have average mortgages of £1,065, so every fraction of a percentage makes a major difference."
What it means for savings
Interest on easy access savings accounts is already starting to drop in anticipation of a cut by the BoE..
Mark Hicks, head of Active Savings at Hargreaves Lansdown, said: "The savings market is forecasting a cut next week, as rates have continued to fall back during the past month, with easy access rates on the HL Savings platform falling 20bps on average whilst fixed terms fell by slightly less at 10bp."
He added: "Given that markets now expect two rate cuts for the remainder of the year, expect easy access rates to fall towards 4% while fixed rates deals could remain relatively stable... It means anyone who has money they don't need for a fixed period of a few months or longer should consider tying it up for a better rate in the longer term."
What it means for annuities
Annuity rates - which offer a guaranteed income for life - have been booming, but that could soon change.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: "The annuity market has been through a period of unprecedented strength, with incomes hovering near all-time highs.
"However, with rate cuts looming, there is a chance that we could see these incomes come down over the coming months and this could be enough to convince those who have put off purchasing an annuity to take the plunge."
She warned: "It's a decision that shouldn't be rushed... Once bought, an annuity cannot be unwound, so don't leave room for regret."
What happens next?
Markets are now expecting base rates to fall to around 3.5% by early 2026, with the Bank taking a careful "quarter by quarter" approach.
The EY Item Club said: "While this is not a promise to continue to cut interest rates once per quarter, it seems likely that this trend will continue going forward."
The Bank's latest forecasts are expected to show inflation settling close to the 2% target in the next two years - giving it more leeway to ease monetary policy. But with inflation still slightly above target and food prices proving stubborn, the path won't be smooth.
