Goldman Sachs expects 6 Bank of England interest rate cuts by mid-2026

Analysts at Goldman Sachs say that while inflation pressures are currently high they are seeing indications that the outlook for UK CPI over the medium term is looking softer, citing:

• growth has weakened markedly, and GS expect this to continue, forecasting only 0.9% growth for 2025
• household real disposable income growth likely to slow
• rising trade tensions are likely to weigh on activity
• underlying cooling in the labour market, will slow wage growth

GS projects the BoE’s Bank rate will drop to 3.25% by the middle of 2026:

• While it is possible that the Bank of England will slow the pace of cuts if underlying inflation fails to make progress, we believe that a step-up to a sequential pace of cuts in response to weaker demand is actually more likely

Bank of England Bank Rate currently. The Monetary Policy Committee next meet on February 6. A rate cut of 25bp is expected.

This article was written by Eamonn Sheridan at www.forexlive.com.