Sterling steady before expected BoE rate cut

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BoE expected to cut rates due to inflation slowdown

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Sterling steady before BoE decision, slight drop against euro

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Some predict further rate cuts through 2026

By Samuel Indyk

LONDON, Dec 18 (Reuters) - The British pound was steady on Thursday before the Bank of England's latest policy decision, with the central bank widely expected to lower borrowing costs for the sixth time during this cycle and fourth time this year. Investors are almost fully pricing a quarter-point cut in the Bank Rate to 3.75% from 4% due to a sharp slowdown in inflation, a looser labour market and stuttering growth.

The rate-setting Monetary Policy Committee has been almost evenly split in recent months, having voted by 5 to 4 to keep rates on hold last month.

"The pieces of the puzzle for renewed easing have now begun to fall into place, including new signs of weakness in the economy and in the labour market, but it will be important to see how BoE members reason," said SEB economist Elisabet Kopelman.

POUND WEAKENS AFTER CPI Sterling was little changed on the day against the dollar at $1.3373 after falling the day before as official data showed inflation slowed sharply last month.

British consumer price inflation fell to 3.2% in November, its lowest since March. The median forecast in a poll of economists surveyed by Reuters had been a decline to 3.5%. Regina Schleiger, director of central bank policy research at SGH Macro Advisors, said the data confirmed that "price pressures have decisively peaked" and expects a further 75-100 basis points of easing through 2026.

Investors, however, are only fully pricing one more 25-basis-point rate cut in 2026, by April, with around a 70% chance of a second by the fourth quarter.

In a busy day for central banks in Europe, Sweden's Riksbank, Norway's Norges Bank and the euro zone's European Central Bank are all also set to announce policy throughout the day.

Against the euro, the pound was down slightly at 87.85 pence.

(Reporting by Samuel Indyk Editing by Tomasz Janowski)