- ORIGINAL NEWS
Bank of England rate cuts likely later but larger, Goldman Sachs says
- SUMMARY
Previously projections had it that the Bank of England would start reducing interest rates in May.
However, new data suggests that rates will now remain stable for longer before decreasing over time.
This is mostly due to the job market remaining strong and wage growth continuing.
In June, rates are expected to start dropping by 25 basis points five times in a row, resulting in a terminal rate of 3% by June 2025.
This will be more significant than the market’s original anticipation of only three reductions by December 2024.
While it’s unclear exactly when the Bank of England will begin cutting rates, they have acknowledged that investors’ bets on rate cuts this year may not be unfounded.
- NEWS SENTIMENT CHECK
- Overall sentiment:
neutral
Positive
“Goldman now sees five consecutive 25 basis point interest rate cuts this year, lowering rates from their current 5.25% to 4%.”
“Bank of England Governor Andrew Bailey said Tuesday that bets by investors on interest rate cuts this year were “not unreasonable,” but resisted giving a timeline.”
Negative
“Goldman analysts put their delay down to the persistent strength of the British labor market and continued wage growth.”
“However, it also said there was an equal chance of the Bank cutting rates by a more aggressive 50 basis points if the economy slips into a “proper” recession.”