On Thursday, the Bank of England concluded its last meeting of the year, leaving the key rate unchanged. This decision turned out to be expected, given that inflation in the UK has reached an eight-month peak. Economists feared that raising rates could have a negative impact on the economy, which is already experiencing difficulties. Earlier this year, the Bank of England has already cut the key rate twice, reducing it from 5.25% to 4.75%. Nevertheless, the latest data on rising inflation in November and higher wages in the summer forced financial markets to reconsider their expectations about possible interest rate cuts in the future. Market participants now assume that next year the decline will be about 50 bps, which is lower than the previous forecast of 70 bps. The Bank of England's decision followed a move by the US Federal Reserve, which also cut rates by a quarter point. Although the decline was expected, traders were surprised by the central bank's assumption that further rate cuts would be negligible, only twice in 2025.
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