UK Jobless Rate Climbs, Adding Pressure on BOE to Cut

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00:00Tell us a little bit more about the data and what does that mean for the Bank of England?

00:06Yeah, morning, Fran. Great to see you. So a few things from me. I think the first is,

00:11obviously, as you mentioned, there's the unemployment rate. That was the surprise

00:13this morning. A little bit higher than we expected, a little bit higher than consensus

00:17and the Bank of England expected. And the other thing, the big bit of news is on wage growth.

00:23Now, that was in line with expectations. But what we've had over the course of this year now

00:27is this relatively gradual fall, but marked fall in wage growth, particularly in the private sector.

00:34And those two things taken together, I think, are obviously music to the ears of the doves

00:39on the Bank of England. I think, to answer your question directly about how it might affect

00:45the Bank of England's thinking, the person we really need to watch is Andrew Bailey and where

00:50he thinks this data, what this data means for the likely path of rates. He is what I would call

00:58the swing voter on the committee now. It was a 5-4 vote in November, and he was the one that voted

01:03for a hold, asking and waiting for more information. But there's no doubt this, again, pushes the Bank,

01:10I think, probably towards a December cut. It's not our baseline just yet. We want to see the inflation

01:16data. We also want to see the budget as well. That's a big event, obviously, coming up. But

01:21there's no doubt, taking out the margin, this data puts a December rate cut, increases the

01:26chance of a December rate cut.

01:30Yeah. And Dan, I mean, again, first of all, the data we had today from the UK is not good

01:35news for the Chancellor. I know there's been a huge repricing of what the market is expecting

01:39the Bank of England to do in December. But how difficult is it going to be for the Bank of

01:45England to make an informed judgment? I know there's like two data points, but it's not

01:49going to be materially different.

01:52Well, and I think that's a really interesting point, because what we had in August was a

01:56story from the Bank of England where they were very worried about inflation, the persistence

02:01of inflation. Fast forward three months, we're now in a place where they're a lot less worried

02:06about the persistence of inflation. And that isn't a huge number of data points. And we almost

02:10get a similar number of data points between now and December. So I think having real

02:15conviction in where the bank is heading is difficult. All of that said, I think the signal,

02:21you know, the signal was relatively clear in the November minutes. And I think for us,

02:28it's a toss up between February and December. We're still in February at the moment. But

02:33all you need, I think, is a downside data surprise on inflation and obviously a budget that is

02:39disinflationary. And I think that will probably tip the balance towards a December cut.

02:44I think the key thing here, though, is that we're not talking about a series of rate cuts. I think

02:49the bank just wants to get to a neutral policy stance. So that might mean one, maybe two more

02:53rate cuts. And I think they'll be happy to sit on their hands. Because remember, inflation in the

02:57UK is still high. And it's up at 3.8% at the moment. It's going to fall back, we think, over the

03:03course of 2026. But there's still quite a way to go till we get back to that 2% target.