Following policymakers’ recent decision to reduce borrowing costs, several major City banks predict that the Bank of England will slash interest rates again in May.
Deutsche Bank and Bank of America expect the Monetary Policy Committee (MPC) to keep rates unchanged at its March meeting, with a rate cut anticipated at the subsequent session.
Sanjay Raja, a senior economist at the German bank, noted, “We now believe that the odds of a May rate cut have increased significantly.”
Following Thursday’s 7-2 MPC vote to reduce rates from 4.75% to 4.5%—with two members even supporting a sharper 0.5 percentage point drop—traders have been increasingly betting on additional rate cuts later this year. One of the proponents of a steeper reduction was Catherine Mann, who had previously advocated for higher interest rates as a means to combat inflation.
Mr. Raja added, “We now expect the MPC to implement one more Bank Rate cut in Q2-25 (May), although this remains a very close call and will depend on inflation moving broadly in line with the MPC’s projections.”
Sonali Punhani, a UK economist at Bank of America, said that with the majority of the MPC committed to a gradual rate-cutting path, they remain confident in a schedule of quarterly cuts. “We continue to expect the next cut in May,” she confirmed.
