The British pound has shown signs of strength in the lead-up to the Bank of England’s (BoE) upcoming policy meeting, reaching its highest level since late July 2025. Investors are closely watching whether the BoE will maintain its cautious approach to policy easing, especially with inflation still running higher than the bank’s target. Many market participants expect a 25-basis point rate cut, with some analysts predicting up to 86 basis points of rate cuts by the end of 2026.
Recent forecasts have painted a more subdued picture for the UK economy, with Jefferies economists revising their growth expectations to 1–1.2% over the next three years, a downward revision compared to the Office for Budget Responsibility’s projection of 1.7–1.9%. This revision suggests that the BoE may be forced to take more aggressive action on rate cuts than currently anticipated. On the fiscal side, Finance Minister Rachel Reeves is expected to announce tax increases in a budget statement later in 2025 to address rising public finance concerns.
The pound’s recent appreciation is largely attributed to market sentiment ahead of the BoE’s decision, though uncertainty remains about whether a larger-than-expected rate cut might be on the table. The outcome of this meeting will likely have a significant impact on the pound’s movement in the near future, as traders and investors adjust their positions based on the central bank’s approach to managing the UK’s ongoing inflationary pressures.
