Washington: Major financial institutions, including Goldman Sachs, Citigroup, and J.P. Morgan, have indicated that the Bank of England (BoE) is unlikely to pursue further interest rate cuts for the remainder of 2025. This assessment comes after the central bank maintained its key interest rate at 4% during its September meeting, following a modest quarter-point reduction in August. The decision reflects ongoing concerns over stubborn inflation and an uncertain growth and employment outlook.
British inflation data for August showed a rate of 3.8%, the highest among advanced economies, reinforcing the central bank's cautious stance. Analysts at Goldman Sachs and J.P. Morgan project that the next easing cycle may begin in February 2026, with potential quarterly rate reductions. However, they noted that a December 2025 cut could still be considered if near-term economic conditions deteriorate significantly. Peel Hunt also aligned with this outlook, forecasting no additional rate cuts this year.
Market expectations mirror these projections, with pricing indicating only a 30% likelihood of further easing by year-end. The BoE has maintained its inflation forecast, expecting a peak of 4% in September and a gradual decline to its 2% target by mid-2027. Governor Andrew Bailey emphasized the need for prudence, cautioning that any future rate cuts would require careful deliberation given prevailing economic uncertainties.
Some divergence exists among analysts. Barclays suggests a November cut is possible if upcoming economic data softens, supporting monetary easing, while BNP Paribas expects the central bank to delay any reduction until December, providing a buffer against uncertainty. Citigroup analysts described the Monetary Policy Committee's approach as reactive, leaving room for short-term adjustments depending on economic developments.
In summary, the Bank of England has effectively paused its rate-cutting cycle for 2025, with future policy decisions likely to remain highly data-dependent as the central bank navigates inflation pressures and economic volatility.