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Financial markets are almost certain that the Bank of England will cut interest rates on Thursday, in what is promising to be a busy week for UK-focused investors with labour market and inflation data also due.

Swaps markets are pricing in a roughly 90 per cent probability of a quarter-point reduction to 3.75 per cent, which would be the sixth such move since the central bank began its rate-cutting cycle in summer last year.

Measures introduced by chancellor Rachel Reeves at the Budget on November 26 are likely to generate a small near-term growth boost, but they are also expected to lower inflation next year, supporting the case for a rate cut in December, say analysts.

However, many investors are expecting a close vote and cautious guidance on further cuts next year.

James Moberly, an economist at Goldman Sachs, expects BoE chief economist Huw Pill and external members Megan Greene and Catherine Mann to vote in favour of a hold. He thinks that number could increase, potentially including deputy governor Clare Lombardelli, depending on incoming data. Governor Andrew Bailey could be casting the decisive vote among the nine members.

Since November, the minutes of Monetary Policy Committee meetings have contained a paragraph from each member summarising their views. Moberly expects Bailey to acknowledge in his section the recent labour market weakness and suggest that he expects further policy easing if the data is in line with expectations.

Many economists expect little change in the formal guidance issued, with the BoE reiterating that rates are likely to remain on a gradual downward path, but it could also emphasise that future decisions will be data-dependent and point to a higher bar for cuts as policy approaches the so-called neutral rate. Valentina Romei

Will the ECB start hinting at interest rate rises?

Investors are unanimous in the view that the European Central Bank will keep benchmark rates at 2 per cent next week, given president Christine Lagarde’s view that the bank is in “a good place”, and instead their focus will be on its economic projections.

Lagarde said this week that rate-setters are likely once again to lift their growth forecasts for the Eurozone at the meeting. These stronger growth forecasts, as well as persistent inflation, have recently led to traders increasing their bets on a rate rise by the ECB next year.

Markets are pricing a roughly 40 per cent chance of the ECB lifting interest rates by a quarter point by the end of 2026, according to levels implied by swaps markets.

But with the potential change in the direction of monetary policy still up for some debate, with swaps market pricing having only moved this way in recent weeks, traders will be especially focused on clues about the timing of a rate rise, with any change in messaging expected to be subtle.

George Moran, Euro area economist at RBC Capital Markets, said he does not expect rate increase in 2026, as “the cyclical tailwinds are likely to be transitory”.

The ECB has been “clear” that “it does not want to overreact to temporary deviations from target”, he added. Emily Herbert

What will much-delayed jobs data show about the state of the US labour market?

Tuesday’s non-farm payrolls report will include figures for October and November, finally giving policymakers and investors a fuller picture of the state of the US labour market after months of flying partially blind. 

The Federal Reserve cut interest rates to a three-year low this week after a divisive meeting in which several officials dissented, amid disagreement on whether to prioritise high inflation or a weakening jobs market. 

The latest jobs report might present more conflicting signals, according to economists at Citigroup. About 45,000 jobs are expected to have been lost in October but 80,000 to have been added in November, according to the bank.

That rebound could have more to do with adjustments to the data based on seasonality than a “genuine improvement in demand for workers”, Citi economists Veronica Clark and Andrew Hollenhorst said in a note.

They also predict the unemployment rate rising to 4.52 per cent from 4.4 per cent, compared with a Reuters poll of economists showing a 4.4 per cent rate. The Fed’s own quarterly projections signal a median rate of about 4.5 per cent at the end of this year. 

“The downside risks to employment appear to have risen in recent months,” said Fed chair Jay Powell after Wednesday’s meeting, noting that lower immigration and participation in the economy might be contributing to the decline in the labour force. Jill R Shah