Economists at HSBC — one of the UK's largest banks — Elizabeth Martins and Emma Wilkes, now expect the Bank of England to cut interest rates on a quarterly basis. Previously, they had forecast a cut at every meeting since September. One of the key reasons for the revision is the country's near-term acceleration in inflation.
While their estimate for the eventual reduction in borrowing costs remains at 3%, the slower pace means this level is now expected to be reached in Q3 2026.
As the analysts noted, earlier projections of more aggressive rate cuts beginning in September now appear overly optimistic. They attribute the revision to updated inflation data, increased economic uncertainty, and the financial regulator’s continued caution in its public statements.
The adjustment aligns with the Bank of England’s recent decision to keep interest rates steady at 4.5%. It reflects the cautious stance of Governor Andrew Bailey amid ongoing concerns about inflation and the potential economic impact of tariffs proposed by US President Donald Trump.