Goldman Sachs now expects the Bank of England to cut interest rates at next week’s meeting, reversing its post-September view and diverging from broader City expectations of no change. Swap markets are pricing just 7.3 basis points of cuts for this meeting, implying most traders still see the MPC on hold.
Goldman cites services inflation undershooting MPC forecasts, cooling private-sector pay growth, and softer GDP as drivers of its U-turn.
Not everyone agrees. Matt Swannell of the EY ITEM Club says recent macro data are “unlikely to move the needle,” predicting a 7–2 vote to hold, despite a divided committee. “Both dovish and hawkish voices will have plenty to back their views,” he adds, with the MPC unlikely to pre-commit to either a December cut or a continued hold.
UBS economist Anna Titareva also expects no change next week, possibly with two or three dissenters, breaking the pattern of quarterly cuts and marking a second straight hold. She sees the next move in February, while noting the odds of a December cut have risen; markets currently price a cumulative 16.5bps of easing by year-end.
What would trigger a December cut?
UBS says the MPC would want further disinflation evidence, slower wage growth, and reassurance that the Autumn Budget has minimal inflation impact. Even then, the Committee may wait for February’s updated projections to avoid signalling back-to-back cuts.
All eyes will be on Governor Andrew Bailey at next week’s press conference for clues on the near-term path.
