(Reuters) -Major Wall Street brokerages have withdrawn their expectations for a September interest rate cut by the Bank of England, as inflation remains sticky and the labour market resilient.
Britain’s annual rate of consumer price inflation unexpectedly rose to its highest in over a year at 3.6% in June, data showed on Wednesday. A Reuters poll of economists had expected inflation to remain unchanged at May’s reading of 3.4%.
Pay growth slowed and employee numbers dropped further in May, but the cooling in the labour market which had alarmed some policymakers appeared less acute than previous data had suggested, official figures showed this week.
This led to BofA Global Research, Citigroup, Morgan Stanley and Goldman Sachs pulling back their expectations for a September rate cut on Thursday.
“The data is not weakening enough for the BoE to accelerate cuts,” BofA said.
Morgan Stanley said that the BoE’s “path beyond remains cautious and data-dependent.”
Both BofA and Morgan Stanley forecast the central bank to reduce policy rates twice each in August and November this year, while Goldman Sachs expects sequential cuts from November through March 2026 to a 3% level.
The UK’s benchmark bank rate currently stands at 4.25%.
Citigroup expects BoE to cut rates thrice this year, in August, November and December.
Money markets are pricing in a total of 48.6 basis points of BoE rate cuts by the year-end, with a 77.3% probability of a 25 basis point move in August, according to LSEG data.
BoE is set to meet next on August 7.
(Reporting by Rashika Singh and Siddarth S in Bengaluru; Editing by Mrigank Dhaniwala)
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