The consensus view in the latest Reuters monthly poll of economists is that the Bank of England (BoE) will cut interest rates by a quarter-point once more this year to 3.75% and then again in early 2026 as a resilient economy generates persistent inflation. (Interest rate futures contracts are pricing in the next interest rate cut in early 2026.) There was no consensus view on the interest rate path throughout next year, with a split on how many cuts would be delivered – with most expecting a couple of interest rate cuts.
Monetary Policy Committee (MPC) member, Catherine Mann, sees a strong case to keep Bank Rate on hold for a prolonged period but stands ready to cut rates forcefully if downside risks to growth materialise. Ms. Mann voted against last month’s quarter-point rate cut to 4.0% – as she has done against most of the BoE’s rate cuts over the past year – as she believes that the upside risks to inflation, identified by the BoE in May, were now beginning to crystallise.
BoE Governor, Andrew Bailey, has cautioned that the UK faces an acute challenge over its weak underlying economic growth and reduced labour force participation since the COVID-19 pandemic. Official data shows that the percentage of 16-64 year olds active in the UK’s labour market is lower than before the COVID-19 pandemic, unlike in other advanced economies. Data for Q2-2025 showed that 21.0% of British people aged 16-64 are neither in work nor actively seeking a job.
The UK’s Financial Conduct Authority (FCA) has announced that it will roll out stricter rules for electronic payment firms from May 2026 to better safeguard customers’ money. The regulator said companies would be required to keep customer money separate from their own funds so that it could be returned if the firm fails. Between 2017 and 2022, the use of current accounts with online money and payment institutions – rather than traditional banks – had surged five-fold.
UK bank shares fell sharply at the end of August after the Institute for Public Policy Research (IPPR) called for a new levy on lenders; while industry figures are worried that the UK Government was planning to raise cash by targeting the sector. The IPPR has recommended that the Chancellor use her 26 November autumn budget statement to tax banks on the estimated £22.0 billion a year they receive in interest from the BoE on reserves held at the central bank as a result of the bond-buying programme.
A group of finance industry bodies is calling for a rethink on looming regulatory standards that they say will make it difficult for banks to participate in crypto markets. The Basel Committee on Banking Supervision, which comprises regulators and central banks from the world’s main financial centres, agreed a set of standards in 2022 for how banks should manage and disclose risks around their exposure to crypto assets. In an open letter to the Committee, various finance industry groups said that the crypto market has changed since 2022, making the proposed standards too conservative.
During the month Fitch downgraded Close Brothers Limited and its Parent (Close Brothers Group plc) – while maintaining their “Negative” outlooks – to reflect challenges to the Group business model which has come under pressure from the protracted uncertainty surrounding the Financial Conduct Authority’s (FCA) review into motor finance commission – given the FCA intends to consult on a customer redress scheme. Fitch also upgraded the long-term issuer ratings of Metro Bank PLC and its Parent (Metro Bank Holdings PLC) to reflect the strategic progress in strengthening the business model and financial performance as well as reflecting regulatory changes that no longer require the Group to raise costly minimum requirement for own funds and eligible liabilities (MREL) debt. The direction of Metro Bank’s ‘evolving’ outlook will depend on the future size of the retained qualifying junior debt buffer. Moody’s has placed Toronto Dominion Bank on review-for-upgrade to reflect its solid financial fundamentals that included its strong Canadian retail franchise as well as the Bank’s consistently strong asset quality, sound capitalisation and good liquidity which protects against unexpected losses and market shocks. Meanwhile S&P upgraded ICICI Bank Ltd – the Parent of ICICI Bank UK PLC – and applied a “Stable” outlook as part of a general rating action on the Indian banking sector to reflect a similar sovereign rating action driven by the country’s sound economic fundamentals that will allow the Indian banking sector to benefit from the country’s good economic growth momentum as well as benefiting from structural improvements such as in the recovery of bad loans.