BofA shifts final interest rate cut in UK to early 2026

BofA analysts have revised their forecast for the pace of interest rate cuts by the Bank of England (BOE). Previously, they expected three reductions in August, September, and November 2025, but now anticipate only two moves by the end of the year. According to the BofA report, monetary conditions in the country will finally ease around February 2026. However, analysts maintain their BOE terminal rate projection of 3.5%.

This shift in BofA’s predictions is attributed to a more resilient UK labor market. Recent data point to an ongoing downward trend in employment and wages, but the bank’s experts do not consider the current situation to be catastrophic.

BofA’s forecasts were also influenced by the country’s stronger inflation statistics. The bank has raised its 2025 consumer price index (CPI) projection from 3.1% to 3.2% and suggests that CPI could peak at 3.7% in September. Unlike the eurozone, the UK’s inflation rate remains well above the 2% target.