Goldman Sachs is out with its near-term forex outlook
Investing.com -- The Bank of England is expected to keep interest rates at 4.25% on June 19 despite deteriorating employment figures, according to a forecast from ING.
The U.K. jobs market has shown concerning trends, with employee numbers falling in nine of the past ten months at an accelerating rate.
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.
This cooling reflects both base effects and a genuine easing of pay pressures, potentially giving the central bank more room to consider rate cuts later this year.
While headline inflation remains problematic at 3.5% and is expected to stay above 3% throughout the year, ING takes a more optimistic view on services inflation.
April’s jump to 5.4% was largely attributed to road tax increases and Easter timing, with the Office for National Statistics later acknowledging an overestimation of the road tax impact.
ING anticipates services inflation will return to 4.6% in May, it said in a note on Friday.
The upcoming rate decision could see a split vote, with ING predicting at least a 7-2 outcome favoring holding rates steady. Alan Taylor and Swati Dhingra, who previously voted for a larger cut in May, are expected to support at least a 25 basis point reduction this time, potentially creating a 6-3 split.
ING forecasts the Bank will implement rate cuts in August and November, followed by two more reductions in 2025, bringing the terminal rate to 3.25%. This projection is slightly more aggressive than current market pricing, which anticipates a terminal rate of 3.55%.