Banco de Inglaterra es probable que recorte el tipo de interés a pesar de una división en la política

The Bank of England faces a deeply split decision as December approaches. Market pricing now assigns a 91.5% probability to a 25-basis-point rate cut to 3.75% according to market pricing. This strong conviction contrasts sharply with the committee's internal disagreement, where a 5-4 vote in favor of easing is widely anticipated. Governor Andrew Bailey's potential shift from hawk to dove hinges on November's inflation drop to 3.5%, yet the vote remains razor-thin.

The four hawkish members point to persistent inflationary pressures, specifically sticky food costs and supply-side bottlenecks that keep prices elevated. They argue the economy isn't yet safe, clinging to the view that inflation remains the primary threat. Conversely, the four doves see weaker labor market signals as the bigger risk. They note slowing wage growth and the recent jump in unemployment to 5%, suggesting the economy needs monetary easing to avoid further deterioration. This division reflects uncertainty about which force will ultimately dominate inflation's trajectory.

Despite the internal rift, the market's confidence in the December cut is remarkably high, leaving little room for surprise in the final vote. However, the narrow margin signals that future policy will hinge critically on incoming labor market data and whether food inflation proves truly transitory. Two additional rate cuts later in 2026 are already factored into expectations, but the MPC's split makes the path beyond that uncertain. The tight vote underscores that while the cut is likely, the BoE's caution means further easing will require undisputed evidence of sustained progress.

Economic Drivers for the Cut

The persistent inflation decline and emerging economic weakness are now the core justification for the expected rate cut. November's CPI figure of 3.6% remains the key metric, demonstrating ongoing progress against the 2% target, even if it sits well above the desired level. This easing pressure, particularly on services inflation as noted by BoE policymakers, reduces immediate concern about price spirals.

Simultaneously, October's GDP contraction of -0.1% signals genuine economic fragility, directly challenging the sustainability of growth at current monetary policy settings. Rising unemployment at 5% further underscores labor market stress, reinforcing the dovish tilt by highlighting the cost of maintaining restrictive policy. Together, these indicators paint a picture of cooling inflation coinciding with weakening economic momentum, creating the necessary conditions for monetary easing.

The combination of slowing inflation and demonstrable economic weakness makes inaction increasingly difficult for policymakers. While inflation remains elevated, the recent downward trajectory suggests it is on a sustainable path lower. This allows the BoE to prioritize supporting growth and employment without triggering significant new inflationary fears. The negative GDP growth and higher unemployment rates provide the tangible economic justification for action, shifting the focus from pure inflation control towards broader economic stability. The data suggests the risks now lean towards the economy being too weak, rather than prices being too hot, making a rate cut the more prudent course.

The Hawkish Resistance and Sticky Food Inflation

The path to a December rate cut hinges on a fragile consensus, with hawkish resistance centered squarely on stubborn food inflation. Despite the BoE's official inflation forecast projecting a return to target only by 2027, the persistent price pressures in the food sector create significant headwinds for policymakers favoring immediate action. This resistance is evident in the deeply divided committee structure, where four members currently oppose any easing. Their argument rests on the reality that while overall CPI sits at 3.6%, core drivers like food costs remain elevated, reflecting ongoing supply-side challenges and domestic demand resilience. This hawkish stance creates a high bar for the dovish faction, which points to slowing wage growth and easing services inflation as evidence that the broader disinflation trend is gaining traction.

The dovish camp, however, contends that the cumulative impact of slowing wages and easing services inflation will soon translate into a meaningful drop in headline CPI. They argue that the 5-4 vote, while narrow, represents a significant shift from previous unanimity on holding rates steady, signaling growing frustration with the pace of monetary tightening. Policymaker Alan Taylor exemplifies this view, expressing confidence that inflation will return to target "in the near term," despite his recent minority vote for a cut. His optimism stems from the belief that the underlying momentum in the labor market and services is sufficient to overcome the lingering food price pressures, potentially warranting more aggressive easing than the official forecast suggests. This internal divergence highlights the central bank's dilemma: how quickly to respond to emerging softening in labor and services markets without prematurely signaling victory over inflation when food costs stubbornly resist.

Ultimately, the decision will require the BoE to weigh the credibility of its commitment to price stability against the risk of over-tightening in the face of slowing economic activity. The narrow vote underscores the lack of clear consensus, with the hawkish resistance based on concrete current data (sticky food inflation) serving as the primary obstacle to an immediate cut, while the dovish benefits rely more heavily on projections of how existing weakening trends will evolve. The outcome will set the tone for the central bank's handling of inflation in the coming year.

Catalysts and Market Implications

The Bank of England's December 18 minutes will be the key near-term catalyst, revealing whether policymakers support a modest 25-basis-point rate cut to 3.75% amid persistent inflation and weak growth. Market pricing already reflects a 91.5% probability of the cut according to market pricing, but the closely divided 5-4 vote expected according to analysis could trigger sharp volatility across risk assets, UK bonds, and equity markets.

For risk assets, the decision hinges on whether the MPC's justification leans toward inflation fears or labor market distress. While a dovish tone may temporarily lift equities, lingering price pressures-especially in food and services-could undermine confidence if wage growth remains sticky. Bonds, meanwhile, are likely to rally on rate-cut bets, but rising yields could resurface if dissenting voices signal resistance to further easing.

Investors should monitor how the minutes frame inflation's trajectory. If policymakers acknowledge downward momentum but cite supply-side risks, volatility will likely spike as traders reassess the pace of future cuts. The 91.5% probability reflects near certainty, but a narrower-than-expected vote could amplify short-term swings. For now, risk exposure should remain calibrated-especially given the fragile balance between economic weakness and inflation persistence.