BENGALURU — The Bank of England will keep its key policy rate on hold on September 18 as inflation is creeping up, but it will cut once next quarter and again early next year, according to a majority of economists in a Reuters poll.
However, a growing minority of economists say the central bank is done with cutting this year.
After peaking at more than 11 percent nearly three years ago, inflation briefly returned to the central bank’s 2 percent target last year but has since risen to nearly double that. With cost-of-living pressures unlikely to let up any time soon, BoE Governor Andrew Bailey said recently there was less certainty about the speed of rate cuts.
Inflation is expected to touch 4 percent in September, according to central bank projections and not return to target until mid-2027.
All 67 economists in the September 8-11 poll expected the BoE to keep Bank Rate on hold at 4.00 percent on September 18, while a strong majority (42) pencilled in a quarter-point cut next quarter. Three economists forecast 50 basis points of cuts in Q4.
However, more than 30 percent or 22 of 67 now see Bank Rate unchanged for the rest of the year, compared with 15 percent in August.
“We’re still in the camp for a cut in November… Next week’s inflation data is going to be very, very important—not for the November meeting itself, but for setting the tone of next week’s decision and perhaps any language tweaks that they have there, whether they want to suggest the pace of cuts is slowing or not,” said James Rossiter, head of global macro strategy at TD Securities.
“If we get a little bit of a softening in inflation and continued labour-market softness, they’ve got everything they need to cut in November. You get a couple of upside inflation surprises, as the labour-market data improves or wage growth reaccelerates, then I think the case for skipping November builds.”
Labour and inflation data for August are scheduled to be released on September 16 and 17, respectively. According to the latest official data, average weekly earnings excluding bonuses grew 5 percent in the three months to June and inflation was at 3.8 percent in July.
Inflation was expected to average 3.8 percent this quarter and 3.6 percent next, staying elevated at 3.4 percent for the year and 2.5 percent in 2026. It won’t return to the central bank’s target until 2027, the poll found.
