The week ahead 11 November 2024 - Central banks push ahead with rate cuts

What to watch out for in the UK economy and property market this week.

Last week saw the Bank of England and the US Federal Reserve cut their policy interest rates, and both by 25 bps. The news adds to the growing evidence that the trajectory for interest rates over the next two years is downwards. However, another important influence on market interest rates are bond yields, and in recent weeks these have been rising. Since the beginning of October, 10-year government bond yields are up by 61 bps in the US, 55 bps in the UK and 40 bps in Germany. In time, we believe central bank rate cuts will reduce bond yields, although the here-and-now situation is the autumn so far has seen the cost of borrowing rise.

Government bond yields on both sides of the Atlantic have softened for a number of reasons. For the UK, the Autumn Budget will lead to a significant increase in gilt issuance. However, another major pressure is coming from the US, where the economic data has been stronger than expected, persuading the financial markets the Fed will cut interest rates at a slower pace than was assumed previously. That perception has increased now President Trump is set to return to the White House, as some commentators argue his proposed tariffs will be inflationary and thus reduce the pace at which the Fed cuts rates.

From a property perspective, interest rates being cut at a slower pace is not a welcome development, but nor is it a prospect that should cause great concern given that in most cases occupier market data for Q3 has been relatively robust. Ultimately, a steady occupier market forms a solid foundation for the investment market. Also, there is growing anecdotal evidence of more investors looking to re-enter the market, providing reason for optimism that we may see higher sales volumes in Q4 2024 and 2025.

Our full analysis of last week’s Bank of England interest rate cut can be found here.

This week will see jobs market and GDP figures for the UK. The concern in recent months has been that the largely negative speculation over the summer on what measures the Chancellor’s Budget might contain may have drained confidence among firms and households. The labour market and GDP numbers should give us an idea whether that was the case and the economy has suffered as a result. Turning to overseas news, data will be released on economic sentiment for the Eurozone, where we are expecting a small improvement.

This week's figures

TUESDAY 12 NOVEMBER

UK Employment Growth, q-on-q, September

373k previous
100k forecast

Over the summer months, speculation was growing on what measures the government might announce at the Autumn Budget, and we suspect that may have slowed down recruitment.

ZEW Euro Area Economic Sentiment Index, November

20.1 previous
22.0 forecast

Given recent the ECB interest rate cuts, low inflation and upbeat GDP figures, we are forecasting sentiment on the outlook for the Eurozone strengthened in November.

WEDNESDAY 13 NOVEMBER

US CPI Inflation, October

2.4% previous
2.4% forecast

Although interest rates have started to fall, they remain high by historic standards. Consequently, we are expecting inflation to have seen little change in October.

THURSDAY 14 NOVEMBER

UK GDP Growth, q-on-q, Q3

0.5% previous
0.3% forecast

Survey evidence suggests that both the business and the consumer sides of the economy decelerated moderately over the summer. We are predicting GDP growth slowed in comparison to Q2.