Bank of America Sees Bank of England Holding Rates

Bank of America (BofA) has revised its outlook for the Bank of England’s monetary policy, signaling that the pace of interest rate cuts may be slower than previously anticipated. According to the bank’s latest assessment, persistent inflation pressures and resilient labor market data in the United Kingdom could prompt the BoE to keep rates on hold in the near term.

BofA economists pointed to stronger‑than‑expected inflation figures and upward revisions to payroll data as key reasons behind the updated forecast. These developments suggest that policymakers may have limited room to move quickly toward monetary easing, leading the bank to adjust its expectations toward a more gradual rate‑cut cycle.

The report also highlighted that the path back to the BoE’s 2% inflation target could be slower in the UK compared with the euro area. Ongoing price pressures in the services sector and firm wage growth are seen as factors that could keep inflation elevated for longer.

Under its revised baseline scenario, Bank of America expects the Bank of England’s policy rate to eventually settle around 3.5%. However, the bank believes the journey toward that level will likely be gradual, with policymakers responding cautiously to incoming economic data.