Goldman Sachs is out with its near-term forex outlook
Investing.com -- The Bank of England (BoE) is likely to maintain its key interest rate at 4.25% during its meeting next week, according to forecasts from major financial institutions.
UBS, Deutsche Bank (ETR:DBKGn), and ING all anticipate the Monetary Policy Committee (MPC) will vote to keep rates steady on June 19 following the central bank’s initial 25 basis point cut in May, which began its easing cycle.
The decision comes amid mixed economic signals, with particular concern about deteriorating employment figures. HMRC payrolls have fallen by 276,000 over the past seven months, including a 109,000 drop in May.
The unemployment rate has reached 4.6% in the three months to April, already meeting the Bank’s projection for Q2 2025.
Private sector wage growth has cooled from 6% to approximately 5% in recent months, running about half a percentage point below the Bank’s May forecasts, according to ING.
Despite these labor market concerns, analysts expect most MPC members will remain cautious. UBS and Deutsche Bank both predict a 7-2 vote split, with external members Swati Dhingra and Dave Taylor (or Alan Taylor, per Deutsche Bank) likely voting for another rate cut.
ING suggests the possibility of a 6-3 split if more members favor reduction.
Inflation remains a key consideration for the central bank. April’s headline inflation came in at 3.5% year-over-year, though the Office for National Statistics later acknowledged this figure was overstated by 0.1 percentage point due to a calculation error.
UBS expects the May inflation print, due one day before the rate decision, to show a decline to 3.3%.
Looking ahead, all three institutions forecast additional rate cuts this year. UBS projects two more 25 basis point reductions in August and November, bringing the Bank Rate to 3.75% by year-end.
Deutsche Bank similarly anticipates cuts in August, November, and December, while ING expects moves in August and November.
For the longer term, UBS sees a terminal rate of 3.0% by 2026, more dovish than current market expectations, while both Deutsche Bank and ING project a terminal rate of 3.25%.
The MPC is expected to maintain its guidance for a "gradual and careful" approach to easing monetary policy, emphasizing that decisions are not on a preset path.