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2025-12-18 20:38:35
[Expected Rate Cut, Hawkish Undertone: Bank of England's Tightening Dilemma Remains Unresolved] ⑴ Institutional economists point out that while the Bank of England's decision to cut its key interest rate to 3.75% was widely anticipated, its internal hawkish stance was strong, and the decision was passed by a narrow 5-4 majority. ⑵ Continued disagreements exist among policymakers, which are not surprising given evidence that inflation will remain sticky in the coming months. This also suggests that a return to the 2% target may take longer. ⑶ The institution expects the Bank of England to cut rates again at its next meeting in February next year, at which time a new set of economic forecasts may support its continued caution on how quickly and how far interest rates can fall. ⑷ However, after that, the institution expects the Bank of England to cut rates only once more in 2026. ⑸ This outlook implies that previous market expectations for an aggressive easing cycle need to be revised, and the path of interest rate declines will be more gradual and limited than some optimistic expectations.
