What is expected in Rachel Reeves' UK Budget statement?

The budget is expected to include significant tax-raising measures and disinflationary policies, potentially leading to more aggressive interest rate cuts by the Bank of England.

How might the UK budget affect the pound sterling?

Sterling is likely to remain weak or trade within a narrow range due to an embedded risk premium, with few catalysts for a substantial rally following the budget.

Will the UK budget lead to lower interest rates?

Yes, strategists anticipate the fiscal measures in the budget could prompt the Bank of England to cut interest rates more aggressively than markets currently predict.

Home / Business and Economy / UK Budget Sparks Rate Cut Hopes Amid Tax Hikes

UK Budget Sparks Rate Cut Hopes Amid Tax Hikes

26 Nov

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Summary

Budget may force Bank of England to cut rates more aggressively.
Chancellor's budget is described as the third biggest tax-raising since WWII.
Sterling shows sustained weakness due to embedded risk premium.

UK Budget Sparks Rate Cut Hopes Amid Tax Hikes

The upcoming UK fiscal statement is predicted to intensify pressure on the Bank of England to enact more significant interest rate cuts than currently anticipated by markets. Investment strategists foresee the budget's fiscal consolidation measures potentially leading to sharper economic growth challenges within the UK.

Analysts highlight that the Chancellor's budget is poised to be a substantial tax-raising event, potentially the third largest since World War II. Measures are expected to target pensions, salary sacrifice schemes, gambling, and landlord insurance, aiming to dampen inflation and pave the way for rate reductions.

Amidst these fiscal maneuvers, the British pound has demonstrated persistent weakness, largely attributed to an embedded risk premium. Experts see limited immediate prospects for a sterling rally, with the currency acting as a pressure valve for market sentiment even as personal tax hikes are reportedly being reconsidered.

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