HSBC and Deutsche Bank have revised their forecasts for the Bank of England’s (BoE) rate cuts, postponing expectations due to ongoing inflationary pressures and economic uncertainty.
HSBC now projects that the BoE will maintain its current interest rates until April 2026, marking a significant delay from previous predictions that a series of rate cuts would begin in 2024. The bank expects the Bank Rate to decrease to 3.00% by February 2027, a shift from the present 4%. This revision reflects the bank’s assessment that inflation will remain stubbornly high, preventing the BoE from easing rates in the short term.
Similarly, Deutsche Bank has adjusted its forecast, now anticipating a rate cut in December instead of November. This change comes after a narrow 5-4 vote in the BoE’s August policy meeting, where Governor Andrew Bailey suggested a cautious approach to monetary policy. Deutsche Bank notes that future decisions will hinge on forthcoming economic data, which will provide clearer guidance on the timing and scale of potential rate cuts.
The UK economy’s resilience, particularly inflationary pressures, continues to cloud the BoE’s outlook. Both banks stress that any adjustments to interest rates will depend heavily on the latest economic developments, with persistent inflation being the dominant factor in policy decisions. As the outlook remains clouded by inflation, investors are cautious, and the broader market awaits clearer signals from the BoE about its monetary policy trajectory.
