The Bank of England could begin cutting interest rates in the fourth quarter of 2026 if energy market pressures ease, according to Andrew Wishart of Berenberg.
Wishart argues that the threshold for further rate hikes remains high, with most members of the Monetary Policy Committee unconvinced that a significant increase in borrowing costs will be required. He points to a more contained energy shock, weaker demand conditions and a softer labour market compared with the 2022 gas crisis.
While inflation may rise in the near term—driven by higher energy prices—it is expected to weigh further on household incomes already under pressure from slowing wage growth, a subdued jobs market and rising tax burdens. At the same time, elevated input costs could challenge businesses’ ability to maintain margins, potentially undermining recent labour market stability.
Crucially, Wishart’s baseline scenario assumes a reopening of the Strait of Hormuz in the near term. Under this outlook, inflation could fall below 2% in the second half of 2027, creating scope for the Bank of England to resume rate cuts later this year.
