"With markets almost completely pricing in an interest rate cut this week, today's decision to lower the base rate to 4% won't catch many off guard. Despite inflation coming in higher than expected, signs of cooling across GDP and the labour market have given the Bank of England the green light to begin monetary easing cautiously. The pace and path of further cuts, however, will be dictated largely by what happens next in employment and wage pressures.
"For private equity, this shift marks a potentially significant turning point. Lower rates could ease financing conditions, reduce debt-servicing costs, and unlock more favourable exit opportunities, particularly for firms looking to list or refinance. But the picture remains nuanced. With inflation still sticky and wage growth in focus, the pace of rate cuts may be slower than hoped. Investors will need to stay agile, balancing optimism about falling rates with realism about lingering macro risks."