Goldman Sachs Delays UK Central Bank Rate Cut Expectations to 2027

Goldman Sachs has delayed its expectation of the Bank of England cutting interest rates until 2027. The previous day, the Bank of England kept rates unchanged and noted that Middle East conflicts could trigger inflation risks.

Goldman Sachs had previously expected the Bank of England to start cutting rates gradually from July, but in a report, the firm now expects a slow rate cut starting next year, with a final target rate of 3%.

The Bank of England held the bank rate at 3.75% on Thursday and indicated that inflation could rise to around 3.5% over the next two quarters. It also added that it remains cautious about the risk of inflation expectations rising and becoming embedded in the economy.

In the report, Goldman Sachs reiterated that if global energy prices continue to rise, the risk of a rate hike in the short term significantly increases, potentially as early as the April meeting.

The conflict in the Middle East and the actual closure of the Strait of Hormuz have caused oil prices to surge, heightening inflation risks across Europe and prompting major banks, including JPMorgan and Morgan Stanley, to delay expectations of easing policies.