International

Bank of England divided as forecasts diverge over early interest rate cuts

Thursday, 6 November 2025 5:02AM UTC

The Bank of England’s Monetary Policy Committee faces internal division amid conflicting economic data and shifting forecasts from global banks, as expectations for rate cuts gain ground ahead of potential policy adjustments this year.

The Bank of England’s Monetary Policy Committee (MPC) faces a deeply divided atmosphere as it prepares for its upcoming decision on interest rates. While the UK interest rate is widely anticipated to be held steady at 4%, conflicting views among policymakers and economists point to an uncertain near-term monetary policy outlook. Recent economic data, particularly on inflation, have fuelled these divisions and prompted differing forecasts from leading financial institutions.

Inflation remains a focal concern for the MPC, even as official figures indicate signs of easing. UK Consumer Prices Index (CPI) inflation stabilised at 3.8% in September, slightly below expectations and showing some relief with food price inflation declining. James Smith, a UK economist at ING, described inflation as likely having peaked and noted falling food inflation as a positive sign. However, Smith also underlined the MPC’s caution, highlighting the committee’s visible divisions over how persistent inflation might be and the ongoing wait for the government’s autumn Budget due at the end of November. He suggested a rate hold in November is probable, with a greater likelihood of cuts emerging in December if the Budget signals tighter fiscal policy.

Notably, banking giants Barclays and Goldman Sachs have recently shifted their stance to advocate for an interest rate cut this month. Barclays’ chief UK economist, Jack Meaning, expressed confidence that slowing wage growth and easing inflation would persuade policymakers to reduce borrowing costs, a view shared by Goldman Sachs. This outlook contrasts previous forecasts where many experts, including Goldman Sachs themselves, had ruled out rate cuts in 2025 or delayed them until 2026.

In fact, Goldman Sachs updated its longer-term forecast in late October, predicting a quarter-point cut to 3.75% in November 2025, followed by quarterly cuts throughout 2026 aiming to reduce the rate to 3% by mid-2026. This adjustment reflects concerns about continued elevated inflation and a weakening labour market, signalling an earlier and more gradual monetary easing than previously expected. However, this forecast differs from the Bank of England’s current stance, which as of November maintains the Bank Rate at 5.25%, the highest in 15 years, emphasizing a restrictive policy to ensure inflation returns sustainably to the 2% target by late 2025.

The MPC’s recent official minutes underscore a cautious approach, balancing subdued economic activity and inflationary pressures. The committee acknowledges external risks, especially geopolitical factors impacting energy prices, which could necessitate future rate hikes despite inflation’s general downward trend. Moreover, MPC Chief Economist Huw Pill has voiced reservations about sharply reducing rates, stressing underlying inflationary pressures and structural economic challenges such as labour shortages, Brexit-related disruptions, and low business investment as factors constraining growth.

This nuanced picture contrasts sharply with the environment faced earlier in the year when several major Wall Street brokerages, including Goldman Sachs, Morgan Stanley, and Citigroup, had withdrawn expectations for immediate rate cuts due to persistent inflation and a tighter labour market. At that time, the consensus leaned towards holding rates steady through 2025, with any easing unlikely before 2026. Now, evolving inflation data and changing economic conditions appear to be shifting some market and analyst expectations.

The policy complexities come amid broader economic and political concerns, including the economic impact of elevated borrowing costs on homeowners with expiring low-rate mortgages and the looming general election in 2025. The UK Treasury’s upcoming Budget aims to stimulate growth through private investment, potentially influencing the monetary backdrop.

In summary, while the Bank of England’s MPC is expected to keep interest rates unchanged in the immediate term, substantial divisions exist within the committee. External economists and bankers are increasingly forecasting rate cuts later this year or early next, reflecting an evolving inflation and labour market backdrop. The MPC’s cautious balancing act highlights the challenge of managing inflation expectations and economic growth amid persistent uncertainties both domestically and globally.

📌 Reference Map:

^[1] The Independent – Paragraphs 1, 2, 3, 5, 6, 7, 8, 9
^[2] Reuters – Paragraphs 4, 10
^[3] Bank of England – Paragraph 5
^[4] AP News – Paragraph 6
^[5] Reuters – Paragraph 7
^[6] Reuters – Paragraph 8
^[7] Reuters – Paragraph 9

Source: Noah Wire Services

More on this

https://www.independent.co.uk/news/business/mpc-goldman-sachs-bank-monetary-policy-committee-inflation-b2859591.html - Please view link - unable to able to access data
https://www.reuters.com/business/goldman-sachs-revises-boe-call-forecasts-rate-trim-november-2025-10-29/ - Goldman Sachs has updated its forecast for the Bank of England's monetary policy, now predicting a 25 basis point interest rate cut in November 2025. This revision replaces their earlier expectation of holding rates steady through 2025 before easing in 2026. The change is prompted by persistent inflation, which stood at 3.8% in September—almost double the BoE's 2% target—and a weakening labour market. Goldman Sachs now anticipates the BoE will make quarterly rate cuts to bring the rate down to 3% by July 2026, earlier than its previous projection of November 2026. Previously, top brokerages such as Goldman Sachs and Morgan Stanley had projected no rate changes for the remainder of 2025 after the BoE held its key rate at 4% in September.
https://www.bankofengland.co.uk/monetary-policy-summary-and-minutes/2023/november-2023 - In November 2023, the Bank of England's Monetary Policy Committee (MPC) maintained the Bank Rate at 5.25%. The decision was based on subdued economic activity, with GDP growth expected to be broadly flat over the first half of the forecast period. The MPC projected that CPI inflation would return to the 2% target by the end of 2025, influenced by economic slack reducing domestic inflationary pressures. The committee also considered the risks of inflation persistence and the potential impact of energy prices, particularly due to events in the Middle East. The MPC emphasized the need for a sufficiently restrictive monetary policy stance to ensure inflation returns to the target sustainably in the medium term.
https://apnews.com/article/7ab39d5ce6096414f524f762ab659562 - The Bank of England has maintained the UK interest rate at 5.25%, the highest in 15 years, while warning of potential increases in borrowing costs if oil and gas prices spike due to geopolitical tensions, specifically the Israel-Hamas conflict. Despite predicting a significant drop in inflation, which was 6.7% in September, the bank anticipates it will not meet the 2% target until late 2025. Some committee members proposed a further rate hike to combat inflation. The bank, along with the US Federal Reserve and the European Central Bank, has recently paused rate hikes amid efforts to curb inflation driven by COVID-19 disruptions and the Ukraine war. Higher interest rates are cooling the economy, impacting homeowners with expiring low-rate mortgages, and creating an economically challenging environment ahead of the 2025 general elections. The treasury’s upcoming budget aims to stimulate growth through private investment.
https://www.reuters.com/markets/rates-bonds/bank-englands-pill-cautious-about-further-rate-cuts-2025-02-13/ - Chief Economist of the Bank of England (BoE), Huw Pill, advised caution against further interest rate cuts despite recent reductions aimed at addressing inflation. Although inflation is decreasing towards the BoE's target of 2%, underlying price pressures persist. Inflation fell from a peak of 11.1% in 2022 to 2.5%, but it is expected to rise to 3.7% temporarily before stabilizing in 2027. The BoE’s Monetary Policy Committee (MPC) is currently divided on the terminology and approach regarding future rate cuts, with a debate between using 'cautious' and 'careful' to describe their policy stance. A quarter-point rate cut was enacted last week, showcasing modest policy easing due to ongoing economic challenges. A fundamental disagreement within the MPC concerns the causes of economic stagnation, with Pill asserting supply issues over demand. Pill highlighted the factors hampering growth, such as a shortage of workers, low business investment, Brexit, energy prices, and the pandemic. Despite observing a slowdown in hiring that could mitigate wage-driven inflation, current wage growth predictions remain higher than desired for 2% inflation. Pill also commented on potential impacts of U.S. trade policy adjustments, noting their longer-term implications for global growth and price stability.
https://www.reuters.com/business/finance/major-brokerages-expect-no-more-boe-rate-cuts-2025-after-september-pause-2025-09-19/ - Most major financial institutions, including J.P. Morgan, Goldman Sachs, Morgan Stanley, and Bank of America, anticipate that the Bank of England (BoE) will not introduce further interest rate cuts in 2025. This expectation follows the BoE’s decision to hold rates steady in September after a 25-basis-point cut in August. The central bank is responding to persistent inflation—UK inflation held at 3.8% in August, the highest among major advanced economies—and ongoing uncertainty in growth and employment. Goldman Sachs, Morgan Stanley, and J.P. Morgan have postponed their predictions for the next rate cut to February 2026, with Goldman and Morgan Stanley adding that a cut could still occur in December if economic data weakens significantly. Barclays and BNP Paribas see a possible rate cut in November or December, respectively, hinging on incoming data. The BoE continues to project inflation peaking at 4% in September, declining to its 2% target by mid-2027, and Governor Andrew Bailey emphasized that any rate cuts will be gradual. Market pricing suggests only a 28% chance of another rate cut in 2025.
https://www.reuters.com/business/wall-street-brokerages-pull-september-boe-rate-cut-calls-inflation-proves-sticky-2025-07-18/ - Major Wall Street brokerages, including BofA Global Research, Citigroup, Morgan Stanley, and Goldman Sachs, have withdrawn their expectations for a September interest rate cut by the Bank of England (BoE) due to persistent inflation and a resilient labor market. UK inflation unexpectedly rose to 3.6% in June, the highest in over a year, exceeding the anticipated 3.4%. Although wage growth has slowed and employment has declined, the labor market’s cooling was less severe than previously thought. Consequently, forecasts have shifted: BofA and Morgan Stanley now anticipate two rate cuts in August and November, while Goldman Sachs expects cuts from November through March 2026. Citigroup predicts three cuts this year—August, November, and December. The BoE’s current benchmark rate stands at 4.25%, and money markets reflect a 77.3% chance of a 25 basis point cut in August. The BoE's next policy meeting is scheduled for August 7.

Noah Fact Check Pro

The draft above was created using the information available at the time the story first emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed below. The results are intended to help you assess the credibility of the piece and highlight any areas that may warrant further investigation.

Freshness check

Score: 8

Notes: The narrative is current, published on 6 November 2025. It references recent developments, including Goldman Sachs' revised forecast from 29 October 2025. The Independent's coverage aligns with Reuters' report from 6 November 2025. No evidence of recycled content or significant discrepancies with earlier publications. The inclusion of updated data justifies a higher freshness score. However, the report's reliance on a single source for certain claims may warrant further verification. ([reuters.com](https://www.reuters.com/business/goldman-sachs-revises-boe-call-forecasts-rate-trim-november-2025-10-29/?utm_source=openai))

Quotes check

Score: 9

Notes: Direct quotes from James Smith of ING and Jack Meaning of Barclays are present. No earlier instances of these exact quotes were found, suggesting originality. However, the absence of online matches for these quotes raises the possibility of exclusive content.

Source reliability

Score: 8

Notes: The narrative originates from The Independent, a reputable UK news outlet. However, the report heavily relies on a single source for certain claims, which may affect its reliability. The inclusion of references to Reuters and the Bank of England's official reports adds credibility.

Plausability check

Score: 7

Notes: The narrative presents plausible claims regarding the Bank of England's interest rate decisions and the influence of major financial institutions. The language and tone are consistent with financial reporting. However, the report's reliance on a single source for certain claims may warrant further verification. The absence of supporting details from other reputable outlets for some claims reduces the score.

Overall assessment

Verdict (FAIL, OPEN, PASS): OPEN

Confidence (LOW, MEDIUM, HIGH): MEDIUM

Summary: The narrative is current and presents plausible claims. However, its heavy reliance on a single source for certain claims and the absence of supporting details from other reputable outlets raise concerns about its reliability. Further verification is recommended to confirm the accuracy of the information presented.

Bank of England
interest rates
monetary policy