Goldman Sachs said on Thursday it now expects the Bank of England (BoE) to maintain interest rates in December, revising its previous forecast of a 25-basis-point cut after what the brokerage termed a “more expansionary” UK budget.
“Prospects for stronger 2025 growth are likely to reduce the urgency for sequential cuts in the near term,” Goldman Sachs economists said in a note.
“While a cut remains possible with large downside surprises to the data between now and December – particularly on inflation – we now believe that a pause is more likely.”
Britain’s finance minister Rachel Reeves announced the biggest tax hikes in three decades in her first budget on Wednesday, citing that she had to repair the country’s broken public services with heavy spending.
The brokerage continues to expect a 25 bp cut in BoE’s November meeting, given previous communication and faster-than-expected progress on inflation, followed by sequential cuts from February taking the bank rate to 3% in November, from a previous forecast of 2.75%.
Goldman Sachs also increased its 2025 GDP forecast for UK to 1.6% from 1.5% and anticipates a modest inflation increase due to stronger demand linked to the GDP upgrade.
(Reporting by Gokul Pisharody）
