The Bank of England looks set to keep interest rates on hold next week as it moves more slowly to cut borrowing costs than central banks in Europe and the US.

The Bank of England remains on alert about price pressures in Britain’s jobs market that have subsided more clearly elsewhere.

The new UK government’s tax and spending plans have only added to the uncertain outlook for inflation.

Investors see only a one-in-10 chance of the Bank of England cutting its Bank Rate from its current level of 4.75% on December 19.

By contrast, the European Central Bank, the US Federal Reserve and the central banks of Canada, Switzerland and Sweden are all expected to lower borrowing costs in the coming days.

The Bank of England has cut Bank Rate only twice from a 16-year peak, helping to make sterling the only currency from the Group of 10 leading economies that has not fallen against the US dollar in 2024.

Investors expect the stop-start pattern to continue. Governor Andrew Bailey last week welcomed the recent slowdown in price growth but said there was still “a distance to travel” with inflation likely to hover a bit above the Bank of England’s 2% target until 2027.

The Bank of England last month raised its inflation forecasts after finance minister Rachel Reeves announced a big increase in government spending in her first budget, temporarily boosting demand in an economy with little spare capacity.

The bank is worried that tax increases on employers will lead to higher prices too – a survey published by the central bank showed more than half of employers planned to pass on some of the cost.

But more than half of the respondents said they would cut jobs and a separate report from Britain’s recruitment body also suggested a sharp downturn in hiring in the wake of the budget.

“With risks remaining in both directions, gradual feels like the right approach for now,” HSBC economists Elizabeth Martins and Simon Wells said in a note to clients this week.

Investors are currently betting on the Bank of England cutting interest rates only three times between now and the end of 2025, lowering Bank Rate by a total of 75 basis points.

By comparison, the European Central Bank is forecast to lop its benchmark rate by 150 basis points – equivalent to six quarter-point cuts, including one expected tomorrow – as Germany, France and other euro zone nations struggle.

Donald Trump’s threat of trade tariffs poses a further risk.

The state of Britain’s labour market could yet cause the Bank of England to rethink its gradual approach if signs of nervousness among employers after the budget turn into a hiring slump.

Britain’s statistics office is still overhauling its main survey, complicating the task of assessing Britain’s underlying inflationary heat.

But separate data collected by tax authorities on employee numbers and wages, as well as figures on vacancies, will be watched closely on Tuesday.

“Signalling from the Bank of England about gradual rate reductions has been very strong of late, suggesting very low odds of a cut next week,” JP Morgan economist Allan Monks said.

“But signs of a faster weakening in the labour market, if sustained, would pressure on the Monetary Policy Committee to deviate from that message,” he added.