Bank of England set for tight rates decision as inflation softens and budget looms

By William Schomberg

LONDON (Reuters) -The Bank of England is set to announce a potentially knife-edge interest rate decision on Thursday with most investors expecting no change before this month’s government budget, but some analysts say inflation heat is cooling enough for a cut.

What had until recently seemed likely to be a clear majority vote to keep the BoE’s Bank Rate at 4.0% now looks much closer.

Investors are assigning an almost one-in-three chance of a cut to 3.75%, up from a one-in-10 possibility a month ago.

Britain’s inflation rate of 3.8% remains the highest among the Group of Seven major advanced economies and the BoE’s benchmark interest rate is double that of the European Central Bank.

INFLATION HELD STEADY IN SEPTEMBER

However, inflation unexpectedly held steady in