Economists at Goldman Sachs have suggested that interest rates might be reduced as early as February or March, particularly if the economy enters a full recession.
This speculation arises as Megan Greene, a member of the Bank of England’s Monetary Policy Committee (MPC), cautioned that higher borrowing costs might persist due to ongoing inflation concerns.
Greene, an American economist, acknowledged the significant decrease in inflation to 4.6% in October as positive, but she highlighted that this was largely due to declining energy prices. She pointed out that core inflation indicators remain worryingly high.
Speaking to Bloomberg TV, Greene expressed concerns about the continued inflation in the UK, noting that markets have not fully recognized the likelihood of sustained higher interest rates.
Goldman Sachs, in a client note, outlined various scenarios, including a 15% chance of an interest rate cut in the first quarter of the next year and a 30% probability in the third quarter.
The note stated, “The MPC is very likely to maintain the bank rate at the December meeting… However, earlier cuts are possible if the economy is weaker than anticipated.”
