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UK Budget Sparks Rate Cut Hopes Amid Tax Hikes
26 Nov
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.
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.
