The Bank of England is expected to cut interest rates at least four times this year, according to a new survey of 51 economists.
the Latest poll It suggests that the base rate could fall from its current rate of 4.75 per cent to 3.75 per cent or lower in 2025, with the majority of respondents expecting cuts of four quarter points to support slowing economic growth in the UK.
The results go beyond the two rate cuts financial markets are currently pricing in for 2025, after traders trimmed their expectations for monetary easing on the back of strong wages data and higher-than-expected services inflation at the end of last year. In fact, 15 percent of those surveyed believe interest rates will fall to 3.5 percent, while three economists expect cuts to 3.25 percent.
Economists warn that policymakers will be under pressure to balance concerns about slow growth – which most respondents believe will be between 1% and 2% this year – with the inflationary risks posed by continued wage growth and the impact of the recent rise in national insurance. Although only two economists expect inflation to fall below the 2 percent target in 2025, most expect it to remain between 2.5 and 3.5 percent.
37 percent of respondents indicate that wage increases are the biggest factor leading to inflation. “Wage increases of 3 to 4 percent still mean labor costs rise by about 6 percent once you add in higher net income,” noted Andrew Sentance, a former member of the bank’s monetary policy committee. The bank’s latest vote indicated a split in the committee, with three members favoring lowering the interest rate to 4.5 percent, while the remaining six supported keeping the interest rate at 4.75 percent.
On the continent, more than half of the economists surveyed expect the European Central Bank to move more aggressively with cuts, cutting interest rates from 3 percent to 2 percent or lower in 2025. Across the Atlantic, respondents were divided over the Fed’s path. A fifth expected two cuts in interest rates, a fifth expected the last three cuts, and 35 percent expected four or more cuts in US interest rates this year.