UK – No interest rate cut till 2025, City economists have predicted

City economists predict that the Bank of England will maintain current interest rates through next year, citing expectations of sustained high inflation. Forecasts from Bank of America suggest that rates, currently at a 15-year peak of 5.25 percent, won’t see a reduction until 2025.

Contrastingly, money markets anticipate the Bank of England might start lowering interest rates by June next year, following a more significant than expected drop in inflation to 4.6 percent in October.

Huw Pill, the Bank’s chief economist, earlier this month indicated that it wouldn’t be unreasonable for investors to expect rate cuts by summer. Similarly, Goldman Sachs last week projected the possibility of initial reductions as early as February.

This slowdown in inflation has encouraged Rishi Sunak to announce the government’s readiness to begin tax reductions. Nonetheless, Bank of America’s analysis suggests that mortgage borrowers may have to wait until February 2025 for a decrease in borrowing costs, with a projected reduction of one percentage point to 4.25 percent over the year.

Agne Stengeryte, a rates strategist, cautioned clients in a recent note, stating, “Our outlook on UK inflation is more challenging than the Bank of England’s, leading us to forecast the initial rate cut in February 2025.”

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