BoE to Cut Interest Rates Just Once More This Year, Held Back By Resilient Inflation, Growth

• The Bank of England (BoE) will cut interest rates by a quarter-point once more this year and then again in early 2026 as a resilient economy generates persistent inflation, according to most economists in a Reuters poll who have largely not changed their outlook in the past month.
• Earlier this month, the central bank cut Bank Rate by 25 basis points to 4.00% after a rare second round of voting, in a 5-4 split in the Monetary Policy Committee. Governor Andrew Bailey said easing should not happen "too quickly or by too much."
• An unexpected surge in inflation to 3.6% in June prompted the BoE to lift its forecast for it to peak at 4.0% this quarter. Data due on Wednesday are likely to show inflation, which the BoE targets at 2.0%, rose further in July to 3.7%. However, economists in the poll still expect inflation to peak around current levels, suggesting that most have not adjusted their forecasts during August, which tends to be a quiet month with many economists away on summer holidays.
• Fifty of 62 economists polled August 13-19 said the BoE will cut Bank Rate by 25 basis points once more this year, most likely at the November meeting, which coincides with the bank's forecasting round. Nine expected the central bank to remain on hold.
• "Right now, the Bank of England is really on a knife-edge in terms of whether it wants to cut interest rates further. We think the disinflationary momentum, particularly in the wage data, will be just about enough to tip the MPC into cutting rates in November. I wouldn't be surprised to see continued split votes - two-way votes, three-way votes," said Chris Hare, senior economist at HSBC.

(Source: Reuters)