Goldman Sachs expects Bank of England to raise rates again in February

Goldman Sachs now expects the Bank of England (BoE) to raise interest rates by another 25 basis points in February, in addition to its forecast for a quarter-point increase next week, citing elevated energy prices and stronger-than-expected economic data , Reuters reported.

The central bank is scheduled to announce its monetary policy decision on November 5, with financial markets widely anticipating a 25-basis-point rate hike. Money markets are currently pricing in an approximately 92% probability of such a move, according to LSEG data.

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A rate increase would mark the Bank of England's first interest rate hike since 2023, as policymakers remain concerned about persistent inflationary pressures. The central bank is keen to avoid repeating its earlier misjudgment of inflation risks, particularly as energy prices remain elevated.

However, the current inflation environment differs from the previous inflation shock, with the US Federal Reserve and European Central Bank having already moved ahead with interest rate increases.

According to Reuters, Goldman Sachsexpects the Bank of England to leave its policy guidance unchanged at the upcoming meeting, reiterating that policymakers remain prepared to act if necessary to bring inflation back to its target.

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The brokerage continues to expect the central bank to leave interest rates unchanged in December but now considers a Februaryrate hike more likely, Reuters reported, citing Goldman's assessment published late on Friday.

Goldman Sachsexpects the Bank of England to maintain its policy rate at 4.25% through the middle of next year before beginning a series of quarterly rate cuts from the fourth quarter of 2027. It sees rates eventually settling at a terminal level of 3.25%.