From Cautious to Confident: Bank of England’s Rate Roadmap and UK’s Upbeat Growth Prospects

According to the latest Reuters poll, the Bank of England will maintain its slow and methodical approach to monetary easing. Economists currently expect a 25 basis point cut in the Bank Rate each quarter through 2025. This anticipation would see the key rate return to 3.75% by the end of next year, which is consistent with last month's outcome.

 

There has also been a gently more favorable GDP outlook for UK economic growth. The median forecast for GDP is now predicted to be 1.0% in 2025, up from the previous estimate of 0.9% in April’s poll. The forecast also has slightly increased for 2026, now estimated overall GDP growth of 1.2%. This adjustment was made after the first quarter came in better than expected, but the forecast is still likely constrained with persistent global trade uncertainty and domestic fiscal pressures.

 

Economists indicate that there is a more favorable outlook via robust real wage growth and increased government spending that is providing short-term boosts. Inflation, however, is still projected to stay above the Bank of England 2% target next year, according to the last poll, projecting over 3% for the average in the coming quarters.

 

The first cut is expected in August and the second in November, as the Bank of England remains on its path to slow and methodical monetary normalization. 

 

Source: Reuters