Goldman Sachs: The Bank of England faces two counterflows, expected to reiterate gradual interest rate cuts

Golden Ten Data on November 7, Goldman Sachs said that the British Central Bank’s Intrerest Rate decision in November encountered two opposing forces. On the one hand, the latest inflation data came clearly to the upside. On the other hand, the UK autumn budget is more expansionary than expected. As a result, Central Bank’s latest inflation forecast will be a product of these two headwinds, with near-term data likely to be revised downwards and modest upward revisions for 2025 and 2026. However, the likelihood that inflation will eventually fall below target will still prompt the UK’s Central Bank to cut its Benchmark Intrerest Rate by 25 basis points to 4.75% this week. The rate cut will be approved by an 8-1 majority. But the upward revision of the 2025 and 2026 forecasts means that the committee is likely to maintain its cautious accommodative policy for now. As a result, it is expected that the minutes will reiterate that it is still appropriate to reduce policy constraints in a “gradual manner”.