Analysts predict no imminent cuts as policymakers weigh inflation risks against sluggish growth
Interest rates are likely to remain at their current level for the foreseeable future, with City analysts divided over the timing of any reductions as the UK continues to grapple with persistent inflation and weak economic growth.
The Bank of England’s monetary policy committee (MPC) is due to meet on Thursday, a day after the Office for National Statistics (ONS) releases August’s inflation figures. Most economists and market participants anticipate that the central bank will maintain the base rate at 4%, with similar decisions expected at the committee’s November and December meetings.
Forecasts for when rates might be cut have become increasingly uncertain. Several analysts have revised their expectations, now predicting fewer or later reductions than previously thought.
The bank’s most recent monetary policy report suggested inflation could reach 4% in September, driven by increases in food prices and regulated energy costs. The latest data showed the consumer prices index (CPI) rising to 3.8% in July.
Matt Swannell of EY ITEM Club observed that most MPC members appear less confident that inflation is on a downward trajectory. “The key question will be whether the MPC adjusts its current guidance to provide a clearer steer that interest rates will remain where they are for the rest of the year,”he said.
“The MPC has suggested that it has little confidence in its near-term forecasts, so the committee’s guidance will likely remain relatively non-committal.” He added that the decisions in November and December may be “closer calls”, as officials will need to consider the impact of Chancellor Rachel Reeves’ Budget on inflation.
Despite the lack of economic growth—ONS figures showed no change in GDP for July—high inflation remains central to the bank’s policy decisions. “Recent data has strengthened the hawks’ case that disinflation is slowing, and that rates need to remain restrictive into next year,” said Thomas Pugh, economist at RSM, in a City AM article. Pugh expects a 7-2 vote in favour of holding rates at Thursday’s meeting.
Bank of England predicted to not cut interest rate until 2026 https://t.co/3qj1f40OI8
— City A.M. (@CityAM) September 12, 2025
Oxford Economics also expects the MPC to keep rates unchanged at its upcoming meeting and to slow the pace of quantitative tightening. “The chances of a September cut have always been low, but the MPC's hawkish messaging in August and the lack of dovish surprises in recent data have reinforced this view,” said Edward Allenby, economist at Oxford Economics.
Allenby anticipates that, while further rate cuts are possible after September, the committee is likely to proceed cautiously, potentially skipping a cut in November and delivering two 25 basis point reductions in 2026.
Pantheon Macroeconomics has also maintained its view that the bank rate will remain at 4% over the coming year, citing the ongoing difficulty in reducing inflation to the Bank’s two per cent target.
Meanwhile, HSBC projects that rates will be held steady at the bank’s next four meetings, while Deutsche Bank has shifted its forecast, now expecting the first cut in December rather than November.
Some analysts, such as those at Capital Economics, believe rates could eventually fall to 3%, but note that this outlook may change depending on the MPC’s voting pattern and the minutes from this week’s meeting.
Paul Dales, chief economist at Capital Economics, has indicated that a vote to hold rates by either Alan Taylor or Swati Dhingra would be seen as another hawkish development. “The MPC has been cutting rates every other meeting since August 2024, it cut rates at its previous meeting and there hasn’t been any developments that would prompt it to speed up.” he said. “We suspect the forward guidance will remain the same with the MPC stating that rate cuts will be ‘gradual and careful’.”
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