Rate cut more likely as unemployment rises and wage growth eases

Rachel Reeves has got a strange stratergy; do as much damage to the UK economy so the central bank must cut rates. It might actually work though. The independence of the Bank of England meets there is one grown up in the house at all times. After the autumn budget, Andrew Bailey may be forced to act decisively to save UK plc by slashing rates before Christmas. That will mean consumers let out a big sigh of relief and business might start investing again. If only this was her plan, and not a consequence of incompetence, she'd be a genius!

A Christmas rate cut now looks more likely than ever. With unemployment at 5% and wage growth cooling to 4.6%, the Bank of England has the room it’s been waiting for. The labour market is softening, and the next move looks like going down. For borrowers, that means the prospect of cheaper mortgages as lenders like Barclays start trimming rates though cuts will be gradual, not dramatic. For savers, it’s the opposite story: now maybe a time to look at the top savings rate while they’re still available. The Bank may want to wait for the Chancellor’s Budget, but the direction of travel is clear rates are heading south.”

The Bank of England have a tough decision to make on 18th December as the bite from the Budget will not be taken into account for the CPI figures released the following day. At 5-4 to hold the last time around, this could sway the decision to flip the other way which would be a decent bit of positive to end the year on after the relentless disastrous months. We are seeing mortgage rates cut but this may be short lived if Wreck It Reeves manages to cause further damage to the economy and business confidence. SONIA swaps are now at the lowest for at least 18mths. Gilts year on year are also down so this is good news for borrowers. Savers tend to be hit harder as the rates are not so keenly passed on. An interesting end to the year is certain but the outcome potentially bleak.

A small rate cut will not save your quarter. Retention will. Unemployment is up and wage growth is easing, so recruitment will slow and pay talks will get tricky. The smartest play is to keep the people you have and help them get better. Be clear about pay review dates and what is realistic. Keep your word. If big rises are off the table, give value in other ways. Mentoring, apprenticeships, cross-training, shadowing and stretch projects build skills without big cheques. Put learning time on the rota so it happens. Back your team’s wallets. Share money advice, payroll saving, and credit union options. Offer predictable shifts, flexible hours and smart hybrid to cut travel costs. Move skills before you move people. Redeploy, adjust hours and cap overtime before you even whisper redundancy. Watch the signals each week. Regretted leavers, absence, overtime and rework. If they rise, act fast. For SMEs, a little investment in outsourced HR gives you structure, legal confidence and moment