Lloyds Banking Group chief executive Charlie Nunn anticipates three base rate cuts this year as he characterised the UK as a “resilient” but slow-growing economy.
The head of the country’s largest retail lender said: “We think there’ll be three rate cuts this year.
“Of course, most people choose to fix their mortgage for two to five years and the pricing on that has been relatively stable and we think that stability is likely to remain for the remainder of this year.
“Those that are on the fixed rates are in a good place, and for those that are on a variable rate, their mortgage is likely to continue to come down slowly with the base rate.”
Nunn was speaking to Sky News at the World Economic Forum in Davos.
This puts the bank boss slightly ahead of market forecasts of two rate cuts this year, with traders betting heavily on a 0.25% reduction by the Bank of England’s Monetary Policy Committee’s next meeting on 6 February.
The base rate is currently 4.75%, while inflation is at 2.5%, above the central bank’s 2% target.
Bank of England governor Andrew Bailey had said in December that he expected four “gradual’ base rate cuts this year.
Markets were initially cheered by this, but have since taken a gloomier view in light of higher government bond borrowing costs and threats of the introduction of tariffs by US President Donald Trump.
The nine-strong Monetary Policy Committee has long said it wants to see services inflation and wage growth fall below 5% before it feels comfortable cutting rates.
The latest set of official figures showed that core services inflation fell to 4.4% from 5% at an annual rate, but private-sector pay rose to 6% in the three months to November from 5.5% in the three months to October.
Last week, the UK economy edged 0.1% higher in November driven by pub and restaurant trade as well as the construction industry, after shrinking in October and September.
Nunn added: “The UK economy is what I would characterise as very resilient but relatively slow growth.
“And that’s first of all because household finances continue to strengthen — there are some customers struggling to make ends meet and we’re always focused on them — but actually, deposits and savings in households have increased 6% year-on-year, and cash flows for many businesses again have also strengthened in the last year.
“What we haven’t yet got is investment in growth, and we still have quite a tight labour market with quite high wage inflation.”
