Bank of England rate cuts should be underway by August, economists predict

The Bank of England will start cutting interest rates by at least August next year, a City A.M. poll of leading Square Mile economists has revealed.

Some 74 per cent of the 19 experts surveyed believe that the central bank will begin cutting rates between May and August next year.

Roughly 21 per cent predicted that rate cuts could start as soon as May.

The results come ahead of the Bank of England’s next meeting on 14 December, where the majority, 95 per cent, expect the Bank Rate to be held at 5.25 per cent.

Although the Bank has left interest rates on hold at each of its last two meetings, policymakers at the bank have stressed that they are not thinking about cuts.

The Bank’s governor, Andrew Bailey, said after the November meeting that it was “much too early” to be talking about cutting rates, a message which he has since repeated.

The Bank argues that a tight labour market will keep wage growth at elevated levels, which in turn will reinforce domestic inflationary pressures.

In its most recent Monetary Policy Report, the Bank forecast that inflation would likely remain above its two per cent target until the end of 2025.

Markets, however, think the delayed impact of interest rate hikes will cause a sharp slowdown in economic activity.

Although the bank is now most focused on domestic drivers of inflation, 53 per cent of economists surveyed thought the ongoing conflict in Gaza was the biggest international threat to bringing down inflation.

An escalation of the conflict in the Middle East could have a major impact on global oil and gas prices, which could prompt a resurgence in inflation.