Independent financial adviser, Samuel Mather-Holgate, argues that the Bank of England needs to tear up the rule book and cut the base rate by 0.5% on Thursday to save households and businesses.
If the Bank of England wants a soft landing rather than a slow-motion stall, it should slash Bank Rate by 0.5 percentage points this week. Inflation has cooled, the economy is in reverse and the housing market is barely moving.
With Friday’s GDP data showing the economy contracted by 0.1% in October, a bigger move now would shorten recession risk, unfreeze property transactions and put a floor under both business and household confidence.
Headline CPI is already down to 3.6% (October) and inflation expectations are edging lower, yet policy is still tight in real terms.
Two key data drops next week look set to concentrate minds: wages and inflation. Fortunately, the balance of probabilities points to softer prints on both.
The labour market is no longer red-hot. Vacancies are falling across most sectors, the unemployed-per-vacancy ratio has risen to 2.5 and recruiter surveys show easing pay pressure as candidate availability improves.
When labour demand cools, wage growth follows. That’s exactly what business surveys and Threadneedle Street’s own Decision Maker Panel are signalling for the year ahead.
On prices, leading indicators point the same way. Grocery inflation has decelerated as retailers pile on promotions into Christmas, and the Bank of England’s own November projections already had CPI gliding toward 3% early next year and toward target thereafter.
Public inflation expectations have ticked down as well. None of that suggests keeping the monetary screws tight. It argues for moving policy toward neutral before the real economy cracks into pieces.
Growth is the canary
Growth is the canary, and it’s spluttering. GDP shrank 0.1% in October after a weak September, with services and construction under strain.
Waiting for immaculate disinflation, which the Bank of England is regularly guilty of, risks turning cyclical softness into structural scarring. A decisive half-point would show the Monetary Policy Committee (MPC) is responding to the turn in the data, not being dragged there months later.
Housing is where tight monetary policy bites the hardest and where a mega-cut would generate immediate benefits. Mortgage approvals have been subdued in the autumn, property chains fragile and developers are mothballing schemes because finance costs are wrecking their viability.
When people can’t move, they don’t spend on kitchens and carpets and trades. When builders can’t build, a supply shortage deepens, keeping rents high and mobility low.
Cut 50bps and you nudge fixed-rate pricing down the curve, improve affordability metrics and bring sidelined buyers and sellers back to the table. It also leaves policy moderately restrictive while inflation trends lower.
Fixed rate squeeze
A cut of 0.5% will also benefit the hundreds of thousands of homeowners who. are rolling off cheap fixes onto rates two or three times higher in 2026. Each month without relief increases arrears risk and squeezes demand via precautionary saving.
A larger rate cut would also help tenants, as landlords pass on the cost of higher rates to renters or, more commonly, exit the market altogether, which tightens supply.
Higher rates are also seeing many small firms that are refinancing working capital delay their hiring and investment. What could be spent on staff and growth is being wasted on interest.
A mega-cut would help not only help households and businesses, but Labour. Rachel Reeves has staked her reputation on stability-first growth and fiscal realism.
Lower borrowing costs would translate into lower monthly payments, higher housing churn and improved consumer sentiment—the kind of “feel-able” change voters notice.
It would also validate the Treasury’s argument that fiscal repair and supply-side reforms can coexist with a less punishing monetary stance. If inflation keeps trending down while activity stabilises, the government can claim orthodox policy is delivering.
Prosaic, yes, but exactly what Britain needs after a lost half-decade from a managerial chancellor and Prime Minister.
Andrew Bailey
The one major obstacle in the path of a 0.5% cut is the fact Bank of England Governor Andrew Bailey’s compass points to yesterday. The MPC’s job is to be led by evidence, not by its governor and it’s important those on it do so.
The objection to a half-point cut is that it might be ‘too much, too soon’. But the balance of risks suggests otherwise.
Wage growth looks set to ease as the labour market loosens, CPI is likely to surprise lower rather than higher as retail discounting intensifies and pipeline pressures fade. Meanwhile, the economy is contracting and the housing market is stagnant. If data surprise to the upside, the MPC can always pause in February when it next meets.
If we dither now and the economy cracks, repairing the damage will be costlier — in jobs, business insolvencies and lost building we’ll regret for years.
So my message to the MPC is: cut big and cut now. Give households and firms a reason to rebook projects, restart their home moves and rehire staff. We can’t austerity-our-way to prosperity, and we can’t starve the housing market back to health.
A 50-basis-point reset won’t fix Britain’s deep supply problems — planning, skills and energy — but it will stop monetary policy from making them worse. That’s a win for the economy and, frankly, a win for the government, too.
Samuel Mather-Holgate is Managing Director at Swindon-based Mather and Murray Financial, a wealth manager.
