Interest rates could fall to 2.75% by the end of summer as rising unemployment puts pressure on the Bank of England, a finance expert has predicted.
After four cuts last year reduced the base rate to 3.75%, Bill Papadakis of Swiss lender Lombard Odier expects the Monetary Policy Committee to implement deeper reductions in 2026.
He is predicting that interest rates will fall to 2.75% by the end of summer.
Papadakis says that rising unemployment and falling inflation in key areas could lead the MPC to cut rates more quickly, with the Bank of England under pressure to support the economy.
“Strong wage growth has already slowed meaningfully as the employment picture has weakened,” he said. “Together with falling services inflation, this should translate into lower price pressures, allowing the Bank of England to cut rates to 2.75% by the end of the third quarter – a level close to neutral.”
Inflation currently stands at 3.2%, above the government’s 2% target, but down from a July high of 3.8%.
Papadakis expects interest rates to be reduced by the end of the third quarter, potentially involving four cuts, while money markets are currently pricing in only two cuts for the entire year.
