By Joel Jose
(Reuters) -Major brokerages including Goldman Sachs, Citigroup and J.P.Morgan expect no more interest rate cuts by the Bank of England this year after the British central bank kept its key rate on hold.
The BoE’s widely expected pause on Thursday followed its quarter-point reduction in August, as it navigates sticky inflation and a murky growth and employment outlook.
This came a day after data showed British inflation in August held at 3.8%, the highest among major advanced economies.
While Goldman Sachs and J.P.Morgan currently project the next easing cycle to commence in February 2026, followed by quarterly rate reductions, strategists at both brokerages acknowledged that a December cut could be warranted should near-term economic data deteriorate notably.
Peel Hunt also aligned in projecting that interest rate cuts will not continue into 2025.
Markets are pricing in just 7.5 basis points of easing by this year-end, according to data compiled by LSEG, implying about a 30% chance that the BoE ease rates again this year.
The BoE held its forecast for inflation to peak at 4% this month and ease slowly to its 2% target by mid-2027, with Governor Andrew Bailey warning the economy is still not out of the woods yet and any rate cuts will need to be gradual and carefully considered.
“The MPC’s reactive approach leaves significant room for short-term changes,” analysts at Citigroup said in a note.
Meanwhile, British brokerage Barclays retained its base case that a November cut is possible because they expect upcoming data to be softer, which would support monetary easing, especially given the central bank’s data-dependent stance.
However, BNP Paribas sees the next cut to be made in December rather than in November saying the delay gives the central bank a buffer against uncertainty.
(Reporting by Joel Jose in Bengaluru; Editing by Rashmi Aich)
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