The Bank of England (BoE) could cut interest rates just one more time this year by a quarter-point, then again early next year as inflation persists.
This is according to some economists following a Reuters poll who by in large have not changed their mindset of the last month.
The BoE is expecting inflation to peak at 4.0% from the current position of 3.6% in June, the data is due on Wednesday, Reuters reported.
Chris Hare, senior economist at HSBC said, “Right now the Bank of England is really on a knife-edge in terms of whether it wants to cut interest rates further.
“We think the disinflationary momentum, particularly in the wage data, will be just about enough to tip the MPC into cutting rates in November.
“I wouldn’t be surprised to see continued split votes – two-way votes, three-way votes.
The risk is we do ultimately get 4% inflation, coupled with the risk wage growth doesn’t ease back in the way we expect.
“If we see indicators of inflation expectations being even more uncomfortably elevated than they are… it would increase the risks of the majority of the MPC opting to pause for the time being.
Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, is predicting the BoE could stay on hold until the end of next year.
He said, “What we’re learning about the economy is that it has an underlying degree of resilience that people had not anticipated, and ultimately that feeds into our rates call as well.”
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