The Bank of England (BoE) is expected to keep interest rates on hold in December amid renewed concerns over global inflation, according to a Reuters poll of economists. However, economists are divided on the impact of the tariffs proposed by US President-elect Donald Trump on the UK economy.
Trump's proposed tariffs, a 10% levy on all imports from foreign countries and 60% on imports from China, are expected to slow global growth and increase inflationary pressures, reducing room for most central banks to ease their policies.
Nearly 90% of economists, or 22 out of 25, who answered additional questions in the November 13-19 survey, expect the proposed tariffs to be implemented early next year.
However, they differed on its impact on the UK economy over the next two to three years. A total of 11 out of 21 stated that the effect was not significant, while the rest stated that it was significant.
The findings contrasted with a Reuters poll of the European zone economy, where a majority of economists, 34 out of 39, said Trump's proposed tariffs would have a significant impact.
The BoE started the easing cycle in August, the BoE lowered the Bank Rate from a 16-year high of 5.25% to 4.75% with two cuts of 25 basis points.
All 66 economists surveyed expected no change from the BoE in December. The median of surveys suggests rates will fall 25 basis points each quarter next year, dropping to 3.75% by the end of 2025.
Every respondent who provided a view expected the next cut to take place early next year.
Among the 15 Gilt-Edged Market Makers, five each expect a cut of 125 or 100 basis points, three predict 75 basis points, while two predict 150 basis points.
The median survey showed inflation expected to average 2.5% in 2024, 2.3% in 2025, and 2.1% in 2026, virtually unchanged from last month's survey.
The UK economy is forecast to grow by 0.9% this year and 1.4% in 2025 and 2026, roughly in line with the BoE's forecast. In early November, the BoE cut its growth forecast this year to 1.0% from 1.25% but raised its 2025 forecast to 1.5% from 1.0%.
