Bank of England poised to cut interest rates amid UK economic gloom

The Bank of England is set to lower interest rates to 4.5% while also reducing economic growth forecasts for 2025, highlighting challenges for Chancellor Rachel Reeves's budget plans. As inflation decreases, this shift underscores scrutiny on the Office for Budget Responsibility (OBR) and its fiscal projections. With original growth estimates of 2% seeming overly optimistic, Reeves faces potential budget cuts if the OBR forecasts show her fiscal targets might be surpassed. A key announcement is anticipated on March 26, detailing any necessary adjustments to her spending plans.

If the OBR's updated forecasts show the chancellor on course to bust her fiscal rules, she is expected to announce cuts to her budget spending plans.

The first iteration of the OBR's updated growth forecast landed on Reeves's desk in the Treasury earlier this week, and will determine whether she is on course to meet her self-imposed fiscal targets.

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